If you own vacation property or are thinking about making such a purchase, you might also consider renting that Jersey Shore vacation home on a part-time basis. Although some owners are hesitant to do so because they worry about damage done by renters to the property and/or its availability for their personal use, all owners should be aware of the many tax benefits gained from renting.
- If you spend more than 14 days at your Jersey Shore vacation home and rent it out over 14 days, you can deduct some of your utilities, insurance, maintenance, and operating costs; HOA fees: and depreciation for the period renters occupy the property.
- If you stay in the home fewer than 2 weeks or 10% of the rental period, whichever is greater, you can treat the house as rental property. This designation allows you to deduct a far greater percentage of the expenses listed in #1. In addition, if the rental income does not cover the cost of the rental time frame, you can deduct up to $25,000 in rental losses (allowable amount is based on your adjusted gross income).
- If you rent your Jersey Shore vacation home for fewer than 15 days a year, you do not have to pay taxes on any rental income received.
Things to consider before you decide to rent include the price you pay for the property and the amount you can reasonably charge for rent; times you are willing to forego unlimited personal use of the home; self-management workload; and your current and future financial circumstances.
- COSTS: Compare your monthly payments and expenses with the average rental amount in the area of your Jersey Shore vacation home. Can you afford the monthly costs if you rent only a few days a year? Generally, the property needs to be rented 15 to 17 weeks a year to break even. The more expensive the home, the longer the rental period should be.
- AVAILABILITY: Whether you hire a management firm or do the renting yourself, you can determine when the home will be available for your personal use. Keep in mind, however, that the highest rental rates occur during the peak vacation season. Although you may lose the ability to always “get away” on an impulse, you can still maintain a certain amount of flexibility in personal use time.
- PROPERTY MANAGEMENT: Because management companies can charge anywhere from 10% to 60% of the rental income, many owners opt to manage their vacation home themselves. If you decide to do so, be aware that you’ll be the one advertising, answering emails and phone calls, hiring cleaning crews and repair firms, scheduling, dealing with emergencies, and screening potential tenants. While these responsibilities may be time-consuming and at times burdensome, bear in mind that you’ll be saving a great deal of money and controlling when and to whom you rent.
- THE FUTURE: Although the rental business may be brisk in the area of your Jersey Shore vacation home right now, the day may come when that is no longer the case. Can you afford your monthly expenses for the property if your rental income decreases slightly? A great deal? If your answer is “no”, you may want to choose a less expensive get-away place, one that you can enjoy free of worry.
Patrick Parker and his Realty Team are experts in Buyer Brokerage and specialize in representing your best interests, negotiating with your goals in mind and getting you the best possible deal when you buy your next Jersey Shore home.
When representing you as a Seller, they go the extra mile to help you achieve your goals. Patrick and his Team are constantly researching the market and property values so your Jersey Shore real estate is priced effectively from day one. They also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.
For more information about buying or selling a Jersey Shore home, please call Patrick at 732-455-5252 or via email with our convenient contact form.