Owning a second home could offer various tax breaks. You will need to state the use of your home: PERSONAL, RENTAL PROPERTY, or COMBINATION OF THE TWO.
PERSONAL USE: Owners occupy the home more than 14 days or 10% of the total number of days it was rented to others at fair rental price. With this classification, you can rent it for 14 days or less each tax year and NOT have to report any rental income. You would not be able to deduct any rental expenses during the days rented. Property taxes and mortgage interest can be deducted if primary residence and second home is $1 million or less.
RENTAL PROPERTY: Their are tax breaks for owners who rent vacation homes and personally use it less than 10% of the rental each year. You must report all rental income but you can deduct all (property taxes, utilities, homeowners insurance, HOA dues, maintenance, and depreciation). Owners can legally show a deductible tax loss and reduce the total amount of taxes owed.
COMBINATION PERSONAL USE AND RENTAL: You can deduct percentages of expenses based on amount of use. If you use second home 40% of the time for personal use - you can deduct 60% of the expenses of rentals for the year. If you rent more than 14 days you must report rental income.
CAPITAL GAIN EXCLUSION - Selling your vacation home you may have a sizable gain, which qualifies to exclude up to $500,000 in capital gains. To do this you must turn your secondary home into the primary home for two of the five years prior to sale. This can be a huge tax savings, but planning and timing will be needed to be considered.
When making any decisions regarding investment properties and your taxes always check with your CPA or tax attorney.