Can You Deduct Property Taxes on a Second Home? Rules and Amounts

If you own or plan to buy a second home, you can often deduct property taxes. But, the IRS limits how much you can claim each year. These deductions apply only if you itemize, and the total cap for all state and local taxes (including property taxes) is $10,000 per year. A financial advisor can help you understand how these limits apply to your situation and identify other ways to potentially reduce your overall tax burden.

Are Property Taxes on a Second Home Deductible?

Property taxes paid on a second home are generally deductible, just like those on your primary residence. However, the deduction is subject to federal limits. It only applies if you choose to itemize your deductions rather than take the standard deduction.

Under IRS rules, both primary and second home property taxes fall under state and local taxes (SALT). In 2017, the Tax Cuts and Jobs Act (TCJA) placed a $10,000 cap on the total SALT deductions you can claim in a single year. However, the One Big Beautiful Bill Act, recently signed into law, changes all that.

The SALT deduction cap will now increase from $10,000 to $40,000. It is important to note that the increase is temporary. It rises by 1% annually through 2029 before reverting to the current $10,000 limit in 2030. This offers high-tax-state taxpayers short-term relief while maintaining a sunset provision.

How the New $40,000 SALT Cap Works

The One Big Beautiful Act sets the SALT deduction limit at a maximum of $40,000 per year. This cap applies to the combined total of all state and local taxes. This includes property taxes on your homes, state income taxes and even sales tax if you elect to deduct it instead.

The One Big Beautiful Act raises the SALT deduction cap to $40,000 per year. This cap applies to the combined total of all state and local taxes, including property taxes on your homes, state income taxes and even sales tax if you elect to deduct it instead.

You should note that the $40,000 limit phases out for incomes above $500,000—reduced by 30 cents for every dollar over that amount, but never dropping below $10,000.

For homeowners with high property taxes or those living in states with high income tax rates, the previous SALT cap often meant you could not deduct the full amount you paid. Even if you owned a second home and paid substantial taxes on both, your deduction would have maxed out at $10,000 under the previous federal law.

This is one example of how the calculation works:

Property taxes on primary home: $7,000
Property taxes on second home: $6,000
Combined property taxes: $13,000
Deduction you can actually claim: $10,000 (due to the previous SALT cap)

With the new $40,000 SALT cap in effect, homeowners, especially those in high-tax states, can now deduct a much larger portion of their property and state taxes.

In the example above, combined property taxes totaled $13,000. This entire amount is now deductible under the updated cap, rather than the previous $10,000 limit. For those with even higher state income or property tax bills, the increased cap offers significant short-term relief. This allows you to lower your taxable income more effectively.

However, the higher deduction is temporary and scheduled to phase out after 2029. It will adjust upward each year before reverting, so planning ahead can help you make the most of it.

What Counts as a Second Home?

For IRS purposes, a second home does not have to mean a traditional house or condo. Vacation homes, cabins, and even boats or RVs with sleeping, cooking and bathroom facilities can qualify as a second home, if used for personal purposes.

To be eligible for the deduction, the property must not be used exclusively as a rental property or business investment. If it is rented, you must personally use it for more than 14 days annually or more than 10% of the days it is rented, whichever is greater.

If the property is primarily rented and personal use falls below this threshold, it may be classified as an investment property instead. In that case, different tax rules apply. Your property taxes may become a business expense rather than a personal itemized deduction.

Special Considerations for Rental Properties

The IRS divides a second home’s use into personal days and rental days. The tax treatment depends on how you split your time between the two uses.

If you meet the personal use requirement, property taxes remain deductible, up to the SALT cap, as part of your itemized deductions. However, if the property is primarily a rental, the taxes are instead deducted as a business expense against rental income.

Say a homeowner rents out their second home for 200 days but personally uses it for 21 days. Since personal use has to exceed 10% of rental days, it still qualifies as a second home. Property taxes can be deducted as part of itemized deductions.

If personal use falls at or below 10% of rental days, the IRS treats it as an investment property. In this case, property taxes are deducted differently.

Other Deductible Expenses on a Second Home

Closeup of a sign in front of a home that was just sold.

In addition to property taxes, there are other expenses you may be able to deduct for a second home. Mortgage interest is typically the largest deductible expense, although it comes with its own limits. Per the TCJA, interest is deductible on up to $750,000 of combined mortgage debt (or $1 million for loans originated before December 16, 2017).

The One Big Beautiful Bill Act makes the current mortgage interest deduction permanent. This allows homeowners to continue deducting interest paid on up to $750,000 of mortgage debt. It also reinstates the deduction for mortgage insurance premiums, which had lapsed after 2021.

You can also deduct points paid to lower the interest rate on your mortgage. This can add up to significant savings in the year you purchase or refinance your second home. Casualty losses, such as those caused by federally declared natural disasters, may also be deductible in some cases.

It is worth noting, however, that regular maintenance, repairs and improvements to your second home are not deductible. While they may enhance property value, these costs are not considered deductible unless the property is classified as a rental or business asset.

Tips to Maximize Deductions

There are two ways to maximize your deduction for property taxes on a second home:

Pay early. If your income is higher in a particular year and you have not reached the SALT cap, paying property taxes before year-end could help.
Check state-level benefits. Some states offer property tax credits, rebates or deductions that can supplement what you are able to claim federally.

These strategies will not eliminate the SALT cap. However, they can help you capture the maximum allowed deduction and reduce your tax burden overall.

Bottom Line

A homeowner meeting with an advisor to discuss tax planning strategies.

Deducting property taxes on a second home can be a valuable way to reduce your taxable income, especially now that the SALT cap has been temporarily increased to $40,000. This higher limit gives homeowners in high-tax states and those with multiple properties an opportunity to deduct more of what they are already paying in property and state taxes. However, this provision is temporary and set to phase out after 2029. Therefore, it is important to plan strategically and capitalize on the expanded deduction while it lasts.

Tax Planning Tips for Homebuyers

If you want to buy a home, a financial advisor can help you create a budget, choose a mortgage and plan for future expenses. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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