Owning a Second Home Raises Tricky Financial Questions
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Here's your Money Briefing for Thursday, October 28th. I'm J.R. Whelan for The Wall Street Journal. The growth of remote work during the pandemic has made owning a second home an attractive option for many Americans. But as more people use second homes for day-to-day living and not necessarily for a weekend getaway, that raises a surprisingly tricky question. Where exactly do you live?
There's no such thing as a co-primary home, even if you are living somewhat roughly equally in two different places. You're only able to designate one primary home, even if you're splitting your time between two.
WSJ Mansion reporter Evie Solomont has been looking into the growth of second home ownership and the financial as well as logistical challenges that go along with it. We'll talk to her about that after the break.
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How did the rise of remote work drive interest in owning a second home?
Owning a second home isn't new, but the pandemic and the proliferation of remote work has given rise to the co-primary home lifestyle, where time is equally split between two or more homes. Sounds like a luxury, but it also requires homeowners to meticulously track where they're spending their time, and there are a lot of other easy-to-miss financial implications. E.B. Solomon writes for the WSJ's Mansion section, she's covered the tax, legal, and financial challenges that people who own multiple homes face. And she joins me now. E.B., thanks so much for being here. Thank you so much for having me. So, Evie, who wouldn't love to have a second home, right? But what's at stake here financially? What do people need to keep in mind who own two homes?
Having two homes is great. It definitely sounds great on a rainy northeast day having a second home in some place warmer. But broadly, you now have the expense of two homes. You have two mortgages in theory, you've got homeowner's insurance for two homes, and you're paying for the upkeep and carrying costs associated with owning two homes. And That could be everything from making sure the refrigerator is stocked when you want it to paying taxes. And of course, the big issue is taxes. Generally, states are taxing your income based on your primary residence. And it's only possible to have one primary residence, so you want to make sure that you're not being taxed by multiple states. For years, some states have tried to tax the income of people who work in their state but live elsewhere, maybe taxing income on days that they're in state.
For the most part, those policies were relaxed during COVID, but this is really a gray area in tax law right now.
Yeah, let's tackle some of the details that people need to keep track of. What actions can homeowners take to stay ahead of this financial impact and the tax rules?
Sure. So for anyone who has more than one home, keeping track or designating one of the homes as your primary residence is going to be really important.
What legal definition determines which house is your primary residence?
For some people, it might be really clear. You might spend just significantly more time in one house.
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