What does "Transient basis" mean, re: AMT, for a second home?
Hi. For a friend of mine, if he has a second home (co-op apartment in NYC) that he visits on occasion, is that considered on a "transient basis" and therefore not eligible for AMT? (A "second home" by nature would seem not be lived in 100% of the time, so I'm not sure how a second home can be considered a "qualified dwelling" because below it says it does not qualify if used on a "transient basis". Any tips? Thanks!)
(Info. on this subject from FREETAXUSA is below.)
Can I deduct mortgage interest on my second home?
Yes, mortgage interest and property taxes can be deducted as itemized deductions on your second home. Your second home can be a house, condo, RV, boat, or camper as long as it has cooking, toilet, and sleeping facilities. There are special rules if you rented out your second home.
For Alternative Minimum Tax (AMT) the mortgage interest is only deductible if the loan is used for your main home or a second home that is a qualified dwelling.
A qualified dwelling for AMT is a house, apartment, condominium, or mobile home not used on a transient basis. House boats or recreational vehicles don't qualify as qualified dwellings.
Answers
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Hi MelbaUSA,
A second home by IRS definition is considered as follows in IRS Publication 936:
"A second home is a home that you choose to treat as your second home." Another way of looking at this means intent. Is it your intent to treat it as a second home?
Second: "If you have a second home that you don’t hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You don't have to use the home during the year."
So your friend's occasional use of his co-op when staying in New York still qualifies as a second home assuming it's not rented out at any time.
The 'transient basis' generally means for a property (co-op in this instance) used as a rental with less than 30 days use.
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