If you own or are buying a second home, you should be aware that, as written, current tax laws encourage second home ownership by allowing deductions for mortgage interest, property taxes and other expenses on vacation homes. The Washington Post offers a detailed look at how buying and owning second homes can result in tax benefits.

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If we ever needed another example of how convoluted U.S. tax law has become, it can be seen in the outline in an article from Realty Times on how the tax code deals with vacation home ownership expenses and deductions.

If your family uses your vacation home and you also rent for part of the year, this article points out how and whether you might be entitled to tax deductions. Fair warning-this is a complex issue, and to find out how the tax laws apply to your individual situation, you should consult a competent accounting professional.

For more information, visit RealtyTimes.

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Section 1031 Exchanges can be used to defer tax on the sale of a property that was held for investment when purchasing another investment property. But, there are a lot of regulations and rules that need to be met in order to qualify for the tax benefits available with a 1031 Exchange.

The Federation of Exchange Accommodators has a great FAQ page with answers to many of the most common questions regarding 1031 Exchanges.

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Many seasonal homeowners don’t want to get enmeshed in community affairs in the vacation community where they own a second home. After all they are on vacation, “why spend time at meetings, I do that at home?”

As part of an increasing trend, some second homeowners around the U.S. are not only spending time at community meetings in their vacation community, they are running for office there!

With development pressures so high, some second homeowners in communities with a large proportion of seasonal homes are opting for greater involvement in local governmental affairs. Some want a say on local zoning issues, others seek to protect their rights and property values against commercial pressures and sometimes rampant over development.

In some jurisdictions, the idea of allowing other than full time residents voting in local elections is not only unthinkable, it’s illegal. Some might even think it’s unconstitutional. Isn’t it supposed to be one person, one vote?

What do you think about this idea? We’d be interested in hearing your opinion. In the meantime, the New York Times has a detailed article on the subject that’s worth checking out.

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Even as the U.S. housing market has cooled, the market for vacation homes is still growing. 2006 set a new record for the number of vacation homes purchased in the U.S. This is fuelled in part by the wealth of many baby boomers, called “the richest generation in the history of the planet” by demographer Peter Francese, it has also been driven by tax deductions that can result in significant tax savings for second home owners.

Believe it or not, a change in the tax law gets a lot of credit for a recent boom in the number of Americans buying second homes. The change allows most home sellers to take up to $500,000 of profit tax-free. Before 1997, sellers generally had to buy a more expensive home to avoid being taxed on profit from a sale. Now you can trade down to a less expensive house and use profit from the sale of the big place as a down payment on a second home.

Via Kiplinger.com

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