How Much Can You Write Off on a Second Home? Rental vs. Personal

How much you can write off on a second home comes down to one question: how do you use it? A home you keep for your own vacations gets you mortgage interest and property taxes, and nothing else. Rent it out seriously and you unlock operating costs, insurance, management fees, and depreciation. Rent it briefly, under 15 days a year, and the income itself disappears from your return. For 2026, the mortgage interest deduction covers loans up to $750,000 across your first and second home combined, the state and local tax cap sits at $40,400 for most filers, and true rental properties report income and expenses on Schedule E with no ceiling on ordinary deductions.

Personal Use Only

If you never rent the property, or rent it fewer than 15 days in the year, your deductions are the same itemized categories you know from your primary residence, claimed on Schedule A.

Mortgage interest is the big one. You can deduct interest on acquisition debt (money borrowed to buy, build, or substantially improve the home) secured by a qualified residence. The $750,000 limit applies to your combined balance across both homes. Carry $500,000 on your main house and $400,000 on the vacation home, and only $750,000 of that $900,000 total qualifies. The cap came from the Tax Cuts and Jobs Act for loans taken out after December 15, 2017, and was made permanent in 2025. Older mortgages keep the previous $1 million combined limit.¹ Home equity loan interest is not deductible unless the borrowed money went into substantially improving the home securing the loan.

Property taxes on the second home fall under the SALT cap. For 2026 the limit is $40,400 ($20,200 if you file separately), and it covers property taxes plus state income or sales taxes together. A phase-down hits higher earners: once modified adjusted gross income passes $500,000, the cap drops by 30 cents for every dollar above that threshold, with a floor of $10,000.²

Everything else is a personal expense with no tax benefit. Utilities, homeowners insurance, HOA dues, routine maintenance, lawn care: none of it deducts when the home stays personal.

The 14-Day Tax-Free Rental Window

Rent the home for fewer than 15 days during the year, and while continuing to use it personally, and you never report the rental income at all. It is invisible to the tax code, with no cap on the dollar amount collected. Owners near a big annual event (a major golf tournament, a bowl game, a music festival) can collect two weeks of rent tax-free.³

The trade is that you cannot deduct any rental-specific expenses tied to those days. Mortgage interest and property taxes still go on Schedule A as before, but cleaning fees, supplies, and short-term rental costs get you nothing.

Rental Property Write-Offs

Treat the second home as a rental and the deduction list expands substantially. To qualify as a rental for tax purposes, your personal use during the year must stay at or below the greater of 14 days or 10% of the days it was rented at fair market value.⁴ Rent it 200 days and you get up to 20 personal days without losing rental classification. Days spent doing repairs or maintenance don’t count as personal use.³

Income and expenses go on Schedule E. Every ordinary and necessary cost of running the rental is deductible: property management fees, advertising, insurance premiums (hazard, liability, flood), utilities, cleaning between tenants, HOA dues allocable to rental use, legal fees for lease drafting, and the tax preparation cost for your Schedule E itself. Travel to inspect or manage the property deducts at the 2026 IRS standard mileage rate of 72.5 cents per mile.⁵

Depreciation

Depreciation is usually the single largest write-off, and it requires no cash outlay. Residential rental property depreciates on the straight-line method over 27.5 years.⁶ Only the structure depreciates, not the land, so the purchase price gets split between the two. County tax assessments are the common way to do that split.

Buy a property for $500,000 with land valued at $100,000, and the depreciable basis is $400,000. That works out to roughly $14,545 per year ($400,000 divided by 27.5). Mixed-use properties deduct only the rental-use share of that figure. Every dollar of depreciation you take also reduces your basis in the home, which raises your taxable gain when you sell.

Repairs Versus Improvements

The classification matters. A repair keeps the property in its current working condition (fixing a broken pipe, patching drywall, replacing a few shingles) and is fully deductible in the year you pay for it. An improvement adds value, extends useful life, or adapts the property to a new use (a new roof, a full kitchen remodel, adding a deck). Improvements are added to basis and depreciated over 27.5 years. Appliances follow a shorter five-year schedule.³ Getting the call wrong cuts both ways: deducting an improvement invites an IRS adjustment, while capitalizing a genuine repair defers a deduction you were entitled to now.

Mixed Use: Splitting Expenses

Most second-home owners land in the middle, using the home themselves for part of the year and renting it out the rest. How the tax code treats you depends on the ratio. Personal use includes any day occupied by you, a family member, or anyone paying below-market rent.⁴

If Personal Use Exceeds the Limit

Cross the greater of 14 days or 10% of rental days on the personal side and the IRS treats the property as a residence. Rental deductions cannot exceed rental income, so the property can never generate a deductible loss. Expenses come off in a required order: mortgage interest and property taxes first, then operating costs (utilities, insurance, maintenance), and depreciation last, only if income remains. Anything the order rule disallows carries forward to future years, where the same limits apply again.⁴

If Personal Use Stays Under the Limit

Stay inside the 14-day/10% cap and the home is a rental. A net loss is possible (though the passive loss rules below still apply), and shared costs must be allocated.

For operating costs like utilities and maintenance, the split is rental days divided by total use days. Rent for 100 days and use personally for 50, and 100 of 150 total days (66.7%) of each shared expense goes on Schedule E. The remaining 33.3% is personal and non-deductible. The IRS prefers a different formula for mortgage interest and property taxes, using rental days divided by 365. That shifts more of those two costs to the personal side (where they’re still deductible on Schedule A) and leaves more rental income available to absorb operating expenses and depreciation.

Why a Paper Loss May Not Actually Save You Tax

A rental second home can show a loss on paper and still deliver nothing on your tax bill, because rental real estate is automatically classified as a passive activity no matter how many hours you spend on it. Passive losses can only offset passive income (income from other rentals, for example). Without passive income to soak them up, losses get suspended and carry forward until you generate passive income or sell the property in full.⁷

One important exception helps many mid-income owners. If you actively participate (own at least 10% of the property and make key decisions like approving tenants and authorizing repairs), you can deduct up to $25,000 of rental losses against wages and other non-passive income. The allowance phases out above $100,000 of adjusted gross income, dropping 50 cents for every dollar of AGI, and disappears entirely at $150,000. AGI of $120,000, for example, cuts the allowance to $15,000. These thresholds are not indexed for inflation, so more owners lose the benefit each year.⁷

What Selling Does to the Write-Offs You Took

The tax bill on a sale often catches second-home owners off guard, especially those who claimed depreciation while renting.

A second home does not get the Section 121 exclusion that shields up to $250,000 of gain ($500,000 for joint filers) on a primary residence. That exclusion requires two out of the last five years of ownership and use as your principal residence.⁸ If you never lived in the second home as your main residence, the full gain is taxable at long-term capital gains rates (assuming a holding period over a year). Owners sometimes convert the second home into a primary residence and live in it for two of the five years before selling to claim the exclusion. The two years need not be consecutive, and any gain tied to non-qualified use (post-2008 years when the home was not your primary residence) stays taxable.

Depreciation gets clawed back separately. The portion of your gain equal to depreciation you claimed (or were entitled to claim) is taxed at a maximum rate of 25% as unrecaptured Section 1250 gain. You owe this even if the market value hasn’t moved much, because depreciation has already reduced your basis. Suspended passive losses accumulated over the years become fully deductible in the year you sell the entire property, which can offset some of the sting.⁷

One boundary worth knowing: a purely personal second home does not qualify for a Section 1031 like-kind exchange to defer the gain into another property. Both the property sold and the property acquired have to be held for business or investment use.⁹ A vacation home you never rent falls outside that rule.

1
Office of the Law Revision Counsel. 26 USC 163 – Interest
2
Office of the Law Revision Counsel. 26 USC 164 – Taxes
3
Internal Revenue Service. Publication 527 – Residential Rental Property
4
Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home, Rental of Vacation Homes, Etc.
5
Internal Revenue Service. The Standard Mileage Rates and Maximum Automobile Fair Market Values Have Been Updated for 2026
6
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
7
Office of the Law Revision Counsel. 26 USC 469 – Passive Activity Losses and Credits Limited
8
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
9
Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031