Second Home or Investment Property? Know the Tax Differences Before You Buy

Buying a mountain property in the NC High Country can be both a dream and a smart financial move—but before you start imagining porch sunsets and cozy weekends, it’s important to decide how you plan to use the property. Will it be a second home you visit a few times a year? Or a full-fledged investment property you rent out to generate income?

The answer doesn’t just affect your lifestyle—it has serious tax implications. Let’s break down the key differences so you can make a confident, informed decision.

Second Home vs. Investment Property: What’s the Difference?

At a glance, the line between a second home and an investment property can seem blurry. Both are additional real estate purchases beyond your primary residence. But the IRS sees them differently based on how often you stay there vs. how often you rent it out.

• A second home is a property you live in part-time. Think vacation cabin, ski lodge, or weekend getaway.
• An investment property is purchased with the intent to earn income—typically through short-term vacation rentals or long-term tenants.

How you categorize your property determines what deductions and tax strategies you can use.

Tax Perks for Second Homes

If your mountain getaway is strictly for personal use (or you rent it for less than 14 days a year), it qualifies as a true second home. Here’s what you can claim:

• Mortgage interest deduction: You may deduct interest on mortgages for both your primary and second homes, up to a combined limit.
• Property tax deductions: You can deduct state and local property taxes (within federal caps).
• No rental income reporting: If you rent it out for 14 days or fewer each year, you don’t have to report the income at all.

But, you can’t deduct operating costs (like cleaning or utilities) if it’s not a rental.

Tax Perks for Investment Properties

If you plan to rent your home out for more than 14 days annually, it’s an investment property, even if you also use it personally. That means:

• You must report all rental income
• But you get access to powerful deductions:
  • Mortgage interest
  • Property taxes
  • Operating expenses (cleaning, management, repairs)
  • Depreciation

This can lower your taxable rental income significantly—especially helpful in high-demand areas like Boone, Blowing Rock, and West Jefferson.

Note: If you also use the home personally, things get more complex. You’ll have to allocate expenses between personal and rental use.

Planning Ahead

Working with an accountant or tax advisor is essential if you’re on the fence—or if you want to use your property as a hybrid (a few months of personal use, the rest as a rental). They’ll help ensure you’re maximizing deductions while staying compliant with IRS rules.

Working with Lori Eastridge Your Local Real Estate Partner

When it comes to buying a second home or investment property in the North Carolina High Country, working with Lori Eastridge means having a trusted local expert in your corner. With deep roots in the region and a keen understanding of its unique mountain markets—from Boone and Blowing Rock to West Jefferson and Banner Elk—Lori brings invaluable insight to every transaction. She knows where the best opportunities are hiding, whether you’re searching for a peaceful retreat, a short-term rental with strong income potential, or a mountain property that will appreciate over time. Lori listens closely to your goals, helps you navigate zoning and vacation rental restrictions, and ensures that every detail—from location and pricing to inspection and negotiation—is handled with care and professionalism.

What truly sets Lori apart is her personalized approach. As a REALTOR® with NC High Country Real Estate, powered by Realty One Group Select, she blends market knowledge with genuine passion for helping people find their perfect place in the mountains. Whether you’re a seasoned investor or buying your first getaway cabin, Lori takes the time to educate, guide, and advocate for you at every step. Her commitment doesn’t end at closing—she remains a resource and ally long after the keys are in hand. If you’re ready to invest in the High Country lifestyle, Lori Eastridge is the partner you want by your side. Connect with her today!