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Home » Business And Finance Articles » Vacation Homes Are Becoming A Reality For More Homeowners

Vacation Homes Are Becoming A Reality For More Homeowners

Whether it's a lakefront cottage or a log cabin in the woods, a vacation home often seems to be a dream that only the wealthy can afford. But these days, you don't have to be a millionaire to own one.

A nationwide survey shows the median household income of second-home owners is $46,500. With today's continued low interest rates, the tax advantages a second home can bring, and a wide selection of areas experiencing solid home price appreciation, this is an excellent time to consider purchasing a second home as an investment – and a great getaway place.

When searching for your second home, remember to investigate the area thoroughly. Ask a Realtor® and the local chamber of commerce to provide information packets, maps and brochures. Take time to visit the area several times – a few months prior to and during its peak season(s). Are the crowds unbearable? Is the weather unpredictable?

Speak with a local Realtor regarding current and past home prices. Knowing the area's sales history will help determine the market value of the homes and effectively predict their appreciation potential.

Once you've settled on a community, work with a Realtor and lending institution to determine how much home you can afford. Drive around the town and its neighborhoods. Experience the day-to-day activity around potential properties. Keep in mind you may decide to retire to the area one day. Will the property serve two purposes – that of vacation and retirement home? More and more Americans are purchasing vacation properties in areas where they plan to eventually retire.

Remember, vacation homes remain a good investment and provide substantial deductions on yearly tax forms if they meet certain criteria. As the laws are ever-changing, complex and detailed, consult your real estate agent, who will usually work with a tax attorney or certified accountant, to calculate the tax benefits of owning a second home.

Relaxing in your own home in that dream vacation spot is not out of your reach. More and more Americans are realizing that owning a vacation home is do-able – not to mention a good investment and a peaceful retreat for years to come.

And here is another random article you might be interested in...

Choosing A College Savings Plan

There are two basic types of tax-free college savings plans, the Coverdell educational savings account and the 529 savings account. Each has advantages and disadvantages depending on the situation of the individual family.

529 college savings plans allow parents, and in some cases grandparents and other family members, to contribute tax-deferred money to a savings account earmarked for college. The money gains tax-free interest and there is no tax assessed on the principle if it is withdrawn to cover eligible college expenses. The current tax rules will be in effect until 2010, but even if Congress does not reauthorize that section of the tax code, tax will still only be applied to the earnings on the account, not the principle.

Every state now offers a 529 plan and some offer more than one type. For example, some states like Florida offer prepaid plans that lock in today's tuition rates and also offer traditional savings plans. It is a misconception that signing up for a state-run college savings program requires your child to attend college in that state. All states have reciprocal agreements allowing participants to choose from a huge number of colleges all over the country. If you have chosen a prepaid plan, however, your child will only receive tuition at the rate you agreed to when you signed up regardless of what college they attend.

Coverdell education savings accounts work in a similar way to Roth IRA accounts. Parents can deposit after-tax income into an account to save for college or private school (one of the unique benefits of a Coverdell account). Any interest on the account is tax-free if withdrawn for eligible educational expenses. However, unlike 529 plans, Coverdell accounts are capped at $2,000 per child. Even if the child has accounts established by grandparents or other family members, the total invested in the child's name cannot exceed $2,000. For this reason, many families choose both a 529 plan and a Coverdell plan.

Also, since Coverdell accounts are held in the child's name, any funds not used for college will eventually be distributed to your child, not back to you. This is the opposite of 529 college savings accounts which are held in the parent's name and can be transferred to other family members.

Finally, the rules covering 529 plans are easier to understand than those covering Coverdell accounts. Families considering opening a Coverdell account should consider consulting with a tax professional to be sure they understand all the rules and tax implications.