1. Vacation Property Walkthrough: Introduction
  2. Vacation Property Walkthrough: Reasons To Purchase Vacation Property
  3. Vacation Property Walkthrough: Considerations When Choosing A Vacation Property
  4. Vacation Property Walkthrough: Timeshares And Fractional Ownership
  5. Vacation Property Walkthrough: Financing A Vacation Property
  6. Vacation Property Walkthrough: International Vacation Properties
  7. Vacation Property Walkthrough: Maintaining A Vacation Home
  8. Vacation Property Walkthrough: Renting Out A Vacation Home
  9. Vacation Property Walkthrough: Selling A Vacation Property
  10. Vacation Property Walkthrough: Conclusion

Planning ahead and good record keeping can help owners limit potentially costly errors when it comes time to sell a vacation property. Capital Gains
To claim the capital gains exemption, an owner would have to make the vacation property a primary residence for at least two years. If the home is not converted into a primary residence for at least two years, the owner will owe tax on any profit from the sale. If the property was owned for more than 18 months, the profit is considered a long-term capital gain (prior to that it is a short-term gain). Certain expenses can be added to the owner's cost basis when determining capital gains; record keeping and tracking all of the expenses associated with the property is vital.

1031 Exchanges
A 1031 exchange, also known as a like-kind exchange or tax-deferred exchange, is a transaction where a seller swaps a rental or investment property for another rental or investment property of equal or greater value, on a tax-deferred basis. The advantage is that the seller may be able to avoid paying capital gains tax on the exchange. A property must be considered a rental property (and not a personal residence) to qualify for a 1031 exchange. This means that the owner must rent out the property for 15 days or more and use it for less than 14 days or 10% of days the home was rented.

Rental Potential
If the home has been used as a rental, a solid rental history can significantly boost the home's value and marketability. Again, keeping accurate records is an important part of vacation-home ownership. Many areas are flooded with vacation properties. The homes may be comparable and offer similar amenities, but one with a strong rental history will likely sell for more money.


Vacation Property Walkthrough: Conclusion
Related Articles
  1. Taxes

    Tax Rules For Renting Out Your Vacation Home

    Here's a rundown of the specific tax rules that apply to homeowners renting out a vacation property.
  2. Taxes

    Tax Breaks for Second-Home Owners

    Owning a second home is a great investment for a variety of reasons, but you need to know the tax implications of multi-home ownership.
  3. Managing Wealth

    Economics of Owning a Vacation Home

    Discover the financial factors behind owning a second home and how weighing your options can determine if a vacation home is right for you.
  4. Managing Wealth

    Vacation Home or Income-Producing Investment?

    There is an alternative to letting your cottage sit empty all year, but turning a profit won't be easy.
  5. Taxes

    Sell Your Rental Property For a Profit

    Being a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
  6. Retirement

    Generate Income For Retirement with Real Estate

    Learn whether rental income is compatible with your lifestyle, how to identify suitable properties, common pitfalls to avoid and how to secure financing.
  7. Investing

    Rent Revenue: A Growing Income Source for U.S. Households

    Never before has rental revenue represented such a large share of income gained by American households.
Frequently Asked Questions
  1. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  2. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
  3. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway.
  4. What is a "socially responsible" mutual fund?

    As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments.
Trading Center