The deductibility of your vacation home expenses depends on the use of your vacation property. If it is strictly for personal use the deductions are basically the same as for your primary residence. You can deduct property taxes and mortgage interest. You may even be able to deduct a home office expense if you meet the requirements.
However, as with your primary home most home improvements are not readily deductible on your tax return. They may be used to reduce a capital gain when your home is sold.
If your vacation home is used as a rental or a combination of rental property and personal use you may be able to deduct some of the home improvement costs.
Most home improvements aren’t tax deductible. Some deductions that are tax deductible would be:
- Energy-efficient improvements: These would include exterior doors, windows, skylights and insulation materials. Central air conditioners, water heaters, furnaces, boilers and heat pumps. Biomass stoves and boilers. These expenses may qualify if they meet requirements detailed on energy.gov:
- Renewable energy systems: There are also tax credits available for the installation of renewable energy systems, like solar panels, solar water heaters, wind turbines, and geothermal heat pumps.
- Home office deduction: If you use part of your home solely for business purposes for you may be able to deduct a portion of your expenses, including mortgage interest, insurance, utilities, and depreciation.
- Medical improvements: If you make home improvements for medical reasons and to accommodate a disabled family member, such as adding a ramp or widening a doorway,
- Capital improvements: Improvements that add value to your vacation home can be used to reduce the amount of capital gains tax you owe when you sell your home.
Some deductions available for a rental property would be mortgage interest, property tax, operating expenses, depreciation, and repairs. You can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Rental property owners can deduct many travel expenses. These include mileage, meals, lodging, and other travel-related costs:
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