Interested in exchanging your vacation home for another closer to home? Well, it may not be as simple as you think. A lot of tax payers are unclear on what the IRS rules are for this type of exchange, and think they qualify when they really don’t. Personal use is a big factor in distinguishing whether or not your vacation home is an investment. Here are some questions to help you figure it out:
- Do you use the property more than 14 days or 10% of the days per 12-month period?
- Is your property rented at fair market value for that 12-month period?
- Have you owned the property for at least 24 months before the exchange?
- Will you own your replacement property for at least 24 months after the exchange?
If you can answer “yes” to all of the previous questions, it’s likely the IRS will consider your exchange legal.
For more on this and other exchange topics, email or call me today!