Secondary Residence
A second residence is a property you plan to live in for part of the year, separate from your primary residence. Let’s look at some of the more common types:
Vacation Homes
Vacation homes are secondary properties used primarily for leisure, often located away from the owner’s primary residence. While it can be a personal retreat for the owner, and also be a source of potential rental income, it comes with extra costs such as mortgage interest, maintenance, and property taxes—even when it is not in use. Owners should also be mindful of IRS rules, especially if the home is rented out, as this can have effects on their tax deductions and income reporting.
Pied-a-terres
A pied-a-terre is a small, part-time city residence used by someone whose primary residence is other work. It is often used for work or convenience. While it does offer flexibility and low-maintenance living in urban areas, it can come with stricter mortgage requirements, limited condo/co-op approval, and potential tax implications, especially in major cities like New York.
Time Shares
A timeshare is a shared ownership model where multiple buyers get exclusive use of a vacation property for a set period each year (typically, one week). Timeshares often have high upfront costs, annual fees, limited flexibility, and are extremely difficult to resell. They’re available as fixed, floating, or points-based models, and while renting one can be a low-commitment way to try it out, buyers should beware of aggressive sales tactics and common timeshare scams in the market.
How to Determine State of Primary Residence
If you have residences in multiple states, the taxing authorities will want to know which is your state of primary residence. For tax purposes, most states look at where you spend the most time, usually using a threshold like 183 days (over half a tax year). Other key steps include registering to vote in the state, getting a driver’s license, and updating your address with the IRS. These all help prove your intent to establish residency in the state, which is crucial to avoid dual taxation if you spend a lot of time in more than one state.