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Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)

Question: Is the mortgage interest and real property tax I pay on a second residence deductible?

Answer:

Yes, state and local real property taxes are generally deductible. Mortgage interest paid on a second residence is also deductible as long as you don't rent out the residence during the tax year, and the mortgage satisfies the same requirements for deductible interest as on a primary residence. If you do rent out the residence, you must use it for more than 14 days or more than 10% of the number of days you rent it out, whichever is longer, for the mortgage interest to be deductible.

  • The combined limitation for mortgage interest on your primary and secondary residence for a married couple filing a joint return or for an unmarried taxpayer is $1,000,000 for acquisition indebtedness and $100,000 for home equity indebtedness.
  • State and local real property taxes are generally deductible.
  • Deductible real property taxes include any state, local, or foreign taxes based on the value of the real property and levied for the general public welfare.
  • Deductible real property taxes don't include taxes charged for local benefits and improvements that increase the value of the property, such as assessments for sidewalks, water mains, sewer lines, parking lots, and similar improvements.
  • Also, an itemized charge for services to specific property or people isn't a real property tax, even if the charge is paid to the taxing authority. You can't deduct the charge as a real property tax when it's a unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), a periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or a flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance).

Additional Information:


Category: Itemized Deductions, Standard Deduction
Subcategory: Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224