First time second home buyer/renter please help

We have never owned a second home nor rental property so I apologize if some of these are stupid questions, but we do plan to buy a second home in the near future, so if….

We bought a second home for $200,000 (20% down and $160,000 loan)
If we live there 60 days and rent it 120 days per year and it sits empty the rest of the year.
And we charge $2,000/mo rent plus deposits as follows:
$600 refundable (less utilities and damages) deposit,
$150 non-refundable cleaning fee,
$150 non-refundable pet fee plus
utilities (which will come out of the $600 deposit) and
request $500 of the $2,000 rent up front

(so all deposits - $900 - & the $500 “holding fee” will draw interest until returned).
With the remaining $1,500 rent due upon arrival (or shortly before)

What would our tax implications be?

Can we deduct mortgage interest & realestate tax for the entire year?

I assume we’d claim the “interest earned” on the deposits as income like any other interest earned?

What about insurance, utilities, property manager, cleaning service, home association dues, and depreciation (and how is the latter computed?)

The renter would be paying utilities 120 days, but we would be paying them the rest of the year.

I apologize for this being so complicated, but they're all questions we really need answered. Thanks very much

Any update on the situation Pete? Hopefully you have figured out a resolution!

You should always make sure that you have a good plan before going a head and investing in property. It costs monety. You need to get it back as fast as possible.

Good luck.

We have never owned a second home nor rental property so I apologize if some of these are stupid questions, but we do plan to buy a second home in the near future, so if….

We bought a second home for $200,000 (20% down and $160,000 loan)
If we live there 60 days and rent it 120 days per year and it sits empty the rest of the year.

You either have a rental or a personal home.
You can use the rental home for personal use, for 14 days a year or for 10% of the number of days it is rented at a fair market price.


And we charge $2,000/mo rent plus deposits as follows:
$600 refundable (less utilities and damages) deposit,
$150 non-refundable cleaning fee,
$150 non-refundable pet fee plus
utilities (which will come out of the $600 deposit) and
request $500 of the $2,000 rent up front

(so all deposits - $900 - & the $500 “holding fee” will draw interest until returned).
With the remaining $1,500 rent due upon arrival (or shortly before)

What would our tax implications be?

Can we deduct mortgage interest & realestate tax for the entire year?

Using the home for personal use for 60 days you would need to prorate the taxes, insurnace, mortgage interest, etc for the days the home was actually rented. Your rental losses could not exceed your rental income.


I assume we’d claim the “interest earned” on the deposits as income like any other interest earned?

What about insurance, utilities, property manager, cleaning service, home association dues, and depreciation (and how is the latter computed?)

The renter would be paying utilities 120 days, but we would be paying them the rest of the year.

I apologize for this being so complicated, but they're all questions we really need answered. Thanks very much

You can learn more about the tax implications by reading IRS Pubs:
- 925, Passive Activities and At Risk Rules
- 527, Residential Rental Property (including Rental of Vacation Homes)