We're told that we can deduct the mortgage interest we pay on our "second home," as well as on our principal residence. Just what is this second home?

Basically, it's a vacation home--an alternate residence that we don't rent out. When we rent it out, it becomes an income property and the rules change significantly.

But notice a sweet little tidbit in the tax laws. It's allowable to rent out a second home for up to 14 days in a given year and not even report the rental income to the IRS. If a convention comes to town, or some other event that brings a lot of people temporarily to our area, then you can cash in by renting out your house--and getting out of town. And you won't hear from the tax man.

If you rent the home out for more than 14 days, however, you must treat mortgage interest as one of several expenses of operating the property. It's still deductible, but you don't have to worry with the limitations to allowable deductions outlined in another recent column--and you do have to worry about whether your costs of operating the rental are exceeded by your rental receipts, among other concerns. It's important to know what classification all of your real estate falls into--talk with your tax advisor. For more information, call Beth at 425-(425) 450-5208 and visit her website at www.bethbillington.com.

Beth Billington is a Realtor® with Coldwell Banker Bain in Bellevue, WA.