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Main Dictionary V

Vacation Home

A vacation home means a secondary housing oriented on recreational aims, i.e. holidays and festive occasions. As a rule, it is located over a great distance from the main residence. Considering the fact that vacation homes are occupied during particular periods, owners frequently lease them out. 

Essence of Vacation Home

Real estate is often grouped into certain classes, mainly for tax imposing. The area, where a homeowner is based in, is usually called a principal residence. The term includes houses, flats, as well as condominiums. To review it as a main place, an individual, being unrelated or married, is obliged to live over there for a larger part of the year. 

A vacation home, in contrast, varies considerably. Being a secondary residence, it can be situated in the alternate location towards the primary address. As it was mentioned before, the owner is able to visit a vacation home for leisure activities on weekends and festive occasions. Time period can range from several days to multiple weeks during the whole year. So that vacation homes shouldn’t be built due to a particular standard, while the form, in addition to the aforesaid, may include a trailer. 

Despite giving a place for recreation, there exists a possibility of vacation homes’ renting in order to make an additional profit. Therefore, a couple lives in California, but at the same time possesses an apartment in New York. For carrying out leisure activities, they attend NY for a couple of days, while the house in California is still their predominant residence. Thus, not to lose money, the couple rents out their flat.

There is no doubt that specific things should be taken into consideration in a vacation home renting process, particularly, tax imposing. Constraints regarding a residence duration, as well as a subtraction of leasing expenditures, are accepted. In addition, selling a vacation home doesn’t bring the same tax deductions as a predominant residence disposition. 

The vacation homes offer countless benefits, along with several significant disadvantages. This is particularly true for financial expenditures. For instance, a higher interest rate for a mortgage is relevant to the vacation home, while a lower one for a loan is applied to the primary address. The reason is simple: there exists a greater risk of default in view that individuals may sell their vacation homes in case of money-related issues. 

Requirements for Vacation Home

For qualifying vacation homes as a form of property, they have to contain the key domestic premises: a sleeping accommodation, a kitchen and a bathroom. Vacation home should be occupied for more than 14 days to meet the private ends. Moreover, a renting process implies an equitable price. The online services such as Airbnb, Craigslist and Zillow are rapidly gaining ground for renting vacation homes. 

Therefore, if all the requirements are followed, the major tax principles for vacation homes would be applied. Subtracted costs entail a renting part of mortgage burden, real estate taxes, and material damage from casualties. 

Other charges that may be subtracted, are associated with the rental property, i.e. promotional and office materials, commission payments, and attorney’s fees. Costs connected with repair and upkeep, or utilization of this rental property also come into play. 

In case a vacation home is a renting subject for more than 15 days a year, the income from renting should be declared to the Internal Revenue Services. So, whether the home refers to a personal residence, the subtracted expenses shouldn’t surpass the rental revenue. The converse is also true. 

If the owner puts up a vacation home for sale, the individual is obliged to be prepared for capital gains, which are reported to the aforesaid government body. This is due to the fact that vacation homes are considered private property assets. Their selling is taxable and must be reflected on Schedule D. Thus, vacation homes differ significantly from the primary residence. 

Investment property related to the term

In certain cases, a vacation home is classified as an investment property. But the opposite situation can’t always be true. Vacation homes acquired for renting turn into investment properties, when they aren’t in use of the owner. 

The key contrast between these holdings is the fact that the investment property is not always a home. It includes accommodation and commercial facilities, and sometimes even assembly of both.

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