For many people, buying a second home in warm, sunny Phoenix is the pinnacle of luxury. Thanks to years of hard work, savings, and planning, you now have your very own place to escape to — a vacation haven, a literal home away from home.

There can be potential downsides to a second home, though. Two homes means two places to maintain, two mortgages, and — for many people, worst of all — two sets of taxes to pay. But did you know those taxes don’t have to be such a pain?

While paying taxes isn’t exactly anyone’s idea of a good time, reaping the rewards of tax breaks associated with owning two homes can take away some of the strain. There are, however, some intricacies worth noting.

Here are just a few tax tips for second-home owners.

1. Write Off Mortgage Interest

Whether it’s your primary residence or your second home, the same rules apply for deducting mortgage interest on your taxes. You can deduct 100 percent of the interest on up to $1 million total debt on your taxes. This doesn’t mean $1 million per house, just $1 million total debt between the two houses. Anything above that is nondeductible. However, if you rent out your second home, the situation gets more complicated.

2. …And Home Improvement Loan Interest

The interest on any home equity loan or line of credit you use on home improvements is deductible, too. There are limits, however, especially if the home equity loan is above $50,000 if you’re filing as an individual, or $100,000 as a couple.

3. …And Property Taxes!

Another deductible? Property taxes. Fortunately, there’s no limit on the amount of these taxes you can deduct on any number of the homes that you own.

4. About Those Property Taxes…

Property taxes may be deductible, but you should make sure you know how they work before investing in a second home — especially if this will be the first property you own in Arizona. Fortunately, Arizona taxes are fairly affordable by national standards, but they can be complicated. To help, you can find handy calculators and breakdowns online.

5. Rental Income

Some folks opt to rent out their second home when they’re not using it, and this can be a great source of income — but it can also be a colossal pain when it comes to taxes. While rental income is tax-free if you rent the home out for 14 days or less, this is neither practical nor permitted in most condo communities, Aderra included.

If you rent out your home, you’ll have to report your income, but you can still claim some deductions. Any expenses incurred by renting, whether utilities or a fee for a property manager, are deductible, but you’ll have calculate how much is deductible based on how much of the time the building was rented compared to how much of the time you inhabited it. If you were there 100 days and the renter was there 100 days, for example, you’d divide the expenses in half.

6. Primary Home and Capital Gains

Sure, maybe you’ve just bought your second home, but there comes a time when you may want to sell it, or perhaps sell your first home and move to Phoenix permanently. You may have heard of the tax break that allows for $250,000 (for an individual, $500,000 for a couple) of tax-free profits when you sell your home, provided you’ve lived there at least two years. However, this doesn’t apply to both homes, only to your primary residence. Maybe your second home has transitioned into a primary residence, or maybe you intend it to eventually. It’s worthing looking into the legalities and ensuring you’re minimizing your losses and maximizing your exemptions when you do consider selling one of your houses.

Whether you’re buying a second home as an investment, or as a home away from home, there are costs and benefits to the decision. Familiarizing yourself with local, state, and federal tax laws can help you get the most out of your taxes, and it may be worth consulting a professional to make sure you are taking full advantage of potential deductions.

Aderra is a condo community in Phoenix. We’re a popular choice for second-home owners due to our location and top-notch amenities. Get in touch with us today to learn more about Aderra!