One of the best ways to prepare for a permanent home in a golf community of your choice is to first purchase a vacation home there. This gives you a few years to understand the more nuanced aspects of life in a particular golf community -– what the neighbors are like, whether the golf club staff provides excellent service, the quality of food in the clubhouse and, perhaps most importantly, what it may be like to live in perpetuity with vacationers just like you.
One rule you can take to the bank, but not literally, is that you will not
Still, if you and your family plan to use your vacation home and rent it out, you could get some payback on your expenses, especially if you look on the net loss each year as the price you pay for a two-week vacation in a pleasant golf community. But if you decide to go this route, be mindful of IRS rules that govern deductions for your vacation home. Today’s Wall Street Journal online has a few reminders that are worthwhile reviewing.
A few key points:
- If you don’t rent your home out for more than 14 days a year, you do not have to pay any tax on the rental income and do not have to report it. I recall a visit to an Aiken, SC, golf community years ago, just 20 minutes from Augusta National. Some homeowners rented out their home for Master’s week every year for $10,000. I imagine owners of homes on Kiawah Island will see similar short-term incomes for this August’s PGA championship. If you choose a vacation home near a golf tournament or other annual event, you could make back a good bit of your annual expenses.
- If you want to use your home for more than two weeks a year, as well as rent it out at other times, you will need to calculate the ration of personal use to rental use. The resulting percentage of rental time provides the portion of your legitimate expenses that you can deduct from total rental income, including depreciation and mortgage interest.
- Be careful when you permit your immediate family members to use the vacation home, even if they pay you “market rent.” The IRS could count those days against your own 14-days of annual personal use. And don’t try to depreciate the portion of your vacation home’s value that represents the land; that is not permitted by IRS rules, but depreciation of furniture and appliances is.
The Wall Street Journal article, which includes a helpful example, is a good refresher for vacation homeowners, and those who would be. At our companion site, GolfHomesListed, you will find sharply priced vacation homes for sale in excellent golf communities like Pawleys Plantation in Pawleys Island, SC, and Ocean Ridge Plantation on the North Carolina coast, just north of Myrtle Beach. Or contact us to discuss other great spots for your future golf vacation home.