Many people dream of owning a vacation home in the mountains or on a beach! Purchasing a vacation property can sometimes also be an income source. But the tax rules are complicated and subject to change at any time.
You don’t want to run afoul of the IRS.
Working with a financial planner at A&I Financial Services will help you make the right decisions for your family. As part of a long-term, real-life financial plan, vacation property may appreciate in value, possibly provide some income, and provide a place for building many fond memories.
Questions to ask as you consider the vacation property:
How often will I use it? How often will I use it 5 years from now? 10 years from now?
If I use a mortgage for the purchase, how much will I regret making the monthly payment?
If things go badly, financially, and suddenly, how much do I have in reserve to keep making the mortgage on the vacation property?
Will I rent it out? How often? What can I learn about the legal, insurance, and tax implications of this decision?
If I rent it out, have I checked with the HOA and the local government about rules and taxes? Don’t run afoul of these issues!
What about property maintenance, taxes, utilities and other costs? Will I be able to cover these comfortably or will it be a stressor?
If all of this is not stressful, but exciting, then pursuing a vacation home may be right for you. And if it is both stressful and exciting, owning a vacation home may still be exciting. In any event, the best results are achieved with a plan. Make sure to discuss your goals, dreams, objectives, fears and excitement with your financial planner before taking the plunge to purchase a vacation home.