What Second-Home Owners Need to Know About Taxes (and How It Affects Your Plans)

Owning a second home — whether it’s a vacation retreat, lake cottage, or rental investment — comes with distinct tax rules that can either help or hurt your bottom line depending on how you use the property. A comprehensive guide from GoBankingRates breaks down how the IRS classifies second homes and the deductions and strategies that matter most for owners heading into 2026. 

How the IRS Defines a Second Home
For tax purposes, a second home can be treated as a personal residence, a mixed-use property, or an investment property based on how many days you live in it and how many days you rent it out. The IRS uses rules like the 14-day and 10% tests to make that determination — and the classification impacts your deduction options.

Mortgage Interest & Property Tax Deductions
If a property qualifies as a residence, you can deduct mortgage interest (up to IRS limits depending on when the loan originated) and state/local property taxes as part of your itemized deductions — though total SALT deductions are capped federally.

Rental Usage Rules
Renting your second home changes the tax game. If you rent it for 14 days or fewer per year, rental income is tax-free, but you still lose some rental expense deductions. If you rent more often and use it less personally, the property is treated more like a rental business, and you can deduct a broader range of expenses — including depreciation, maintenance, and insurance — on Schedule E.

Capital Gains When You Sell
Second homes don’t automatically qualify for the big tax exclusion available on a primary residence. To exclude up to $250,000 ($500,000 if married) of capital gains on sale, you must meet the IRS ownership and use tests by living in the home as your primary residence for at least two of the five years before selling. Otherwise, gains will be taxable, based on how long you owned the property.

State & Local Property Tax Breaks
Some states or localities offer property tax benefits or exemptions on second homes — but these vary widely, so it’s worth checking with your local assessor to see what might apply where your property is located.

🏡 How I Can Help

Taxes are a big part of your second-home ownership strategy, but they’re just one piece of the real estate picture. As your realtor, I can help you evaluate how use, timing, and market conditions interact with your tax goals — whether you’re buying, selling, converting a second home to a primary residence, or considering rental income. I can also connect you with trusted tax professionals so you have expert support for your financial decisions.

Thinking about a second home or wondering how 2026 could affect your situation? Let’s talk — I’m here to help you make the smartest move for your goals.

Every move starts with a conversation

Let's talk! I’ve proudly served the Greater Richmond area as a full-time Realtor for more than 19 years, and I’ve called Virginia home for over 25.

My goal is simple: to help you reach yours.

Jason Burke
+1(804) 291-6676
jason@brgreal.com