Hamptons Homebuyers Have Already Figured Out How to Game the Tax Plan

[underpants]

https://www.bloomberg.com/news/articles/2017-11-10/hamptons-homebuyers-already-figured-out-how-to-game-the-tax-plan?utm_campaign=news&utm_medium=bd&utm_source=applenews

Out in the Hamptons, Wall Street’s favored beach resort on Long Island, brokers and buyers already have a workaround for a tax-plan provision under consideration in Congress that would take away the mortgage-interest deduction for second homes.

A client of Brown Harris Stevens broker Jessica von Hagn who works at a hedge fund decided to turn the vacation home he’s buying into an investment property by setting up a limited liability company. That will allow him to deduct the interest and earn rental income at the height of the season from the modern home on Bridgehampton’s Lumber Lane, with four bedrooms, three baths and a swimming pool on an acre of land.

For the buyer: problem solved. For the Hamptons market: more high-end vacation properties getting listed as rentals, more competition and, most likely, falling rents.

If markets are flooded with properties for lease, rents will fall and so will values for those homes, she said.

[marybourg]

1. Well, if not using your vacation home yourself

during the height of the summer season, but instead renting it out and paying tax on the entire rent received, then deducting the mortgage interest paid is "gaming the tax plan", at least according to the headline writer, then I say "go for it"; bring in all the taxable income you can.

PS- he doesn't need to set up an LLC (emphasis theirs)in order to deduct legitimate business expenses, which the mortgage interest will be if he rents out the house; he can do it just as well as an individual. The LLC may be useful in other ways, however.