For many second-home owners in Wrightsville Beach or Oak Island, the dream is simple: a private sanctuary. You want to leave your surfboard in the hallway and your clothes in the closet without worrying about strangers sleeping in your bed next weekend.

However, choosing not to rent your vacation home comes with a specific set of financial trade-offs. While you avoid the headaches of property management, you also lose access to significant tax shelters.

If you are keeping your coastal cottage all to yourself in 2025, here is the tax reality you need to know.

The "Simplicity" Benefit

The primary tax benefit of a personal-use-only home is simplicity. You do not file a Schedule E. You do not have to depreciate the property (which means you don't face "depreciation recapture" taxes when you sell). Your tax return looks much like it did before—just with a bit more mortgage interest.

The "Lost" Deductions

When you rent out a property in Topsail or Surf City, the IRS views it as a business. This allows you to write off "operating expenses" against your income. When you keep the home for personal use, those expenses are 100% yours to bear.

Non-Deductible: Utilities, HOA fees, insurance premiums (which can be $5,000+ in coastal zones), repairs, and cleaning costs.

Deductible: You can generally still deduct mortgage interest and property taxes, provided you itemize.

Caution: The Tax Cuts and Jobs Act caps the mortgage interest deduction on $750,000 of total mortgage debt (primary + second home combined). If you have a $500k mortgage in Raleigh and buy a $400k beach house in Hampstead, you will hit this cap.

The "Augusta Rule": The 14-Day Loophole

There is a massive exception that every coastal homeowner should know. Under IRS Section 280A(g)—famously known as the "Augusta Rule"—you can rent your home for 14 days or less per year without reporting any of the income to the IRS.

The Strategy: You could rent your Wrightsville Beach home for just the week of the Azalea Festival or the 4th of July at peak summer rates (e.g., $4,000/week).

The Result: You pocket the $4,000 tax-free. It does not go on your tax return.

The Catch: If you rent it for 15 days, you must report all 15 days of income. You cannot cross the line.

The Future Sale: Capital Gains Sting

The biggest surprise comes when you sell.

Primary Residence: You can exclude up to $500k in profit tax-free (Section 121 exclusion).

Second Home: You get zero exclusion. Every dollar of profit is taxed as Capital Gains.

NC Tax: On top of federal taxes, North Carolina will tax that gain as income—flat at 4.25% for the 2025 tax year.

Your Next Step

Deciding between "personal sanctuary" and "income producer" isn't just an emotional choice; it's a tax strategy.

Aspyre Realty Group are experts in listening and communicating people's wants into homes that work for them. We can help you run the numbers on potential rental income versus the value of your privacy, and even connect you with CPAs who specialize in coastal real estate assets. Let’s connect to ensure your beach house fits your financial portfolio as well as it fits your lifestyle.