Buying a second home is an exciting step—whether it’s a cozy weekend getaway, a future retirement spot, or a property that brings in extra income. But before you start browsing listings, it’s important to understand how your intended use affects how the home is classified — and what that means for your mortgage, taxes, and more.

Let’s break it down.

Vacation Home (aka Second Home)

A vacation home is a property you plan to live in for part of the year — not full-time, and not just as a rental. While it’s perfectly fine to rent it out when you’re not there, the key difference is that you can’t rely on that rental income to help qualify for your loan.

What qualifies as a vacation home?*

• You stay there yourself for part of the year 

• It’s not rented out full-time

• It’s a one-unit property, livable year-round

• You maintain full control — no timeshares or third-party management

• It’s located a reasonable distance from your primary residence

Lenders may also limit how many days per year you can rent it out. Be sure to ask your lender about specifics.

Tax Considerations

If you rent the property out for more than 14 days a year, that income is taxable (per the IRS). But you may also be able to deduct related expenses — like mortgage interest and maintenance — as long as you’re using the property yourself for no more than:

• 14 days or
• 10% of the days it’s rented (whichever is greater)

Taxes can get complicated quickly, so it’s best to check with a CPA before moving forward.

Investment Property

An investment property is purchased solely to earn income. It’s not meant for personal stays — your goal here is to rent it out full-time and treat it like a business.

What qualifies as an investment property?

• You don’t use the property for personal stays

• It’s rented to tenants to generate income

• You have more flexibility when it comes to deducting maintenance and operating costs

• You may work with a property manager or short-term rental platform like Airbnb or Vrbo

Since the property is treated as a full-time rental, the income it generates is fully taxable. But on the upside, you’ll have more freedom to deduct expenses like repairs, insurance, advertising, and more.

What If You Want to Do Both?

Buying a second home you plan to enjoy but also rent out occasionally? That’s where things can get a little murky. Both your lender and the IRS have specific rules that determine how the property is classified — and it can affect your financing options, tax liabilities, and rental flexibility.

In short: how often you use the home vs. how often it’s rented matters a lot. If your goal is to enjoy the space occasionally and earn some rental income on the side, make sure you’re clear on the boundaries.

Bottom Line

A second home can be a great lifestyle upgrade or a smart financial move — but it comes with added responsibilities. You’re not just buying another house — you’re managing another set of taxes, bills, and maintenance tasks.

Before you buy, talk to a Mortgage Loan Officer at Greenway Mortgage about how the home will be classified, and connect with a tax advisor to understand any implications based on how you plan to use the property.

888.616.9885

Note: The information provided here is general and for informational purposes only. Always consult a qualified tax professional and your lender for advice tailored to your unique situation. *Internal Revenue Service, “Topic No. 415 Renting Residential and Vacation Property.