Your second home isn’t just a retreat—it’s a strategic asset. Whether it’s tucked in the mountains, along the coast, or near family, your vacation property can play a key role in your financial future. With thoughtful planning, it can provide income, reduce tax liability, and support long-term legacy goals.
Here are three powerful ways to make your vacation home work harder:
- Earn Income Without the Tax Bill
Many high-net-worth families are choosing to rent out their second homes, without triggering a large tax event.
- Strategy: Rent it for 14 days or fewer annually to take advantage of the “Masters exemption.” This IRS rule allows you to earn short-term rental income completely tax-free. No reporting, no hassle.
- Sell Smarter with a Tax-Savvy Exit
If the time comes to sell, you have options to preserve more of your gains.
- Strategy: Convert the home into a rental first to become eligible for depreciation benefits, or convert to a primary residence for at least two years to take advantage of up to $250,000 ($500,000 for married couples) of tax-free capital gains.
- Use It as a Legacy Asset
A vacation home can be more than a getaway—it can become a meaningful family legacy. But think first before you add your heirs to the deed. This could create hefty tax consequences later on after you pass away.
- Strategy: Involve your heirs in the property’s upkeep and use. This builds emotional connection and stewardship that strengthens your family’s wealth beyond dollars.
- Leverage Tax Benefits to Boost Wealth
Owning a second home offers potential tax deductions that can enhance your overall financial picture.
- Strategy: Work with your advisor to understand mortgage interest deductions, property tax limits, and how rental income affects your tax situation.
A Place for Memories—And Momentum
A vacation home is a symbol of success, but it can also be a lever for wealth growth. With the right strategy, it supports your lifestyle today and strengthens your legacy for tomorrow.
Let’s create a plan that puts your vacation home to work. Contact us today.
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
Image Description: A red vacation home sits by a peaceful lake with mountains in the background. The bold text reads, “Your Vacation Home as a Wealth Tool.” Kramer Wealth Managers logo is shown.
