Question: My primary residence is in Florida. I have owned and rented a condo in Hawaii since 2004. If I stopped renting the condo and lived in it for half the year, would my condo be considered a second home? Would there be tax consequences? – Name not provided
Answer: If you lived in the condo half the year and no longer rented it, it would be a second home. You could deduct any mortgage interest and real estate taxes paid on the condo as part of your itemized deductions. You should maintain the depreciation schedule for your records because when you sell the property, depreciation factors can reduce your cost basis.
When you sell a rental property at a loss, you can deduct the loss. When you sell a second home, the loss is considered personal and is not deductible. In both cases, a gain on the sale would be taxable. – Paula Taylor
© 2017 The Orlando Sentinel (Orlando, Fla.); Paula Taylor, CFP, contributes to the Orlando Sentinel’s Ask an Expert series. Distributed by Tribune Content Agency, LLC.
IF YOU EVER FIND YOURSELF IN THIS SCENARIO OR A CHANGING OF LIVING ACCOMMODATION – I ALWAYS RECOMMEND SPEAKING WITH YOUR TAX ACCOUNTANT BEFORE MAKING ANY CHANGES TO YOUR LIVING STATUS SO THAT YOU CAN MAXIMISE YOUR TAX ALLOWANCES AND MAKE SURE YOU ARE DOING EVERYTHING LEGALLY.