How do I report the sale of my second residence? Your second residence (such as a vacation home) is considered a capital asset. Use Schedule D (Form 1040), Capital Gains and Losses and Form 8949, Sales and Other Dispositions of Capital Assets to report sales, exchanges, and other dispositions of capital assets.
How do I avoid capital gains tax on a vacation home?
Another option for deferring capital gains taxes is to do a tax-deferred exchange, called a Section 1031 exchange by the IRS. A 1031 exchange is a swap of one investment property (not a personal vacation home) for another, and it allows you to defer most or all of your capital gains liability.
Can a rental property be a personal use second home?
It is still a rental property as long as it was available for rent during 2015 (the fact that it wasn’t rented will not make it a personal use second home). You will just put “0” for question on “the days rented at FMV” if only available to rent but not rented.
What are the rules for selling a second home?
The replacement property must meet the following criteria: 1 You must own the home for at least two years after exercising the 1031 exchange; and 2 You must rent it out for at least 14 days per year; and 3 You cannot use the home for personal enjoyment for more than 10% of the days the home is rented out, or more than 14 days per year.
Is it time to sell your vacation home?
Although the economy has started its long and slow recovery, the financial strain has led many owners to consider selling their vacation rental properties.
How to depreciate a second home while you own it?
If your second home was rented out while you owned it, you could opt to deduct real estate depreciation for the number of days it was occupied by renters or available to rent each year. As an example, if the property was rented or available to be rented for 50 days out of the year, you could claim 50% of the yearly depreciation deduction.