Mar 15, 2021

Owning A Second Home

Many people with means have a principal residence sometimes in a no income tax, or low income tax state and then maintain a second residence somewhere else.  It could be a vacation get away like a mountain cabin or a regular home perhaps the home they owned before they moved for tax reasons.  This is all fine; but maintaining two homes is expensive.  If the purpose is having a vacation home, it would be much cheaper to rent a home for a few weeks or months a year. 

Many snowbirds do just that.  They live in cold places during spring, fall and summer; but rent in warm places January - April.  Arizona and Florida are favorites for those high season months.  While it may cost $4,000 a month or much more depending on the home and amenities, usually all inclusive, it still much cheaper than owning a second home.   

People who maintain two homes as a principal and secondary residence should factor in all the costs.  If the purpose is to avoid state income taxes by moving to a no or low income tax state, if the cost of maintaining the secondary residence is greater than the tax that would have been paid, just maybe it makes no sense.  Of course, there could be many reasons for keeping the secondary residence that usually ties to family, friends and other life style issues that many be relevant.  

Most important could be appreciation.  If the second home is in an area with good appreciation maybe the rising value will offset the carrying cost so that eventually if the home is sold all or most of the cost to maintain the home will be recouped.  And of course, the tax treatment is different for primary and secondary homes so it is important to consult a good accountant on the tax treatment.  

At Paragon Home Resources, we assist families with life decisions.  We often work with families selling and buying homes and that would include second homes.