Vacation home buyers need to consider hidden costs: Property and State Taxes, Other Costs

In general, you usually have to understand two things, says Kehoe. First, what does it take to establish residency in the new state, and second, what does it take to break residency in your prior home state? To establish residency in the new state, the rule is typically that you have to live there for more than half the year, though there is a lot of nuance for that, he explains.

“Breaking residency in your home state can be much more complicated,” says Kehoe. He uses the example of New York: “First they look at your days spent in New York and whether you maintain a permanent place of abode there; then they will also look at what your 'intent' is‘is your new home really your permanent residence?,” he says.

To determine this, they may look at things like: Are most of your family business and social connections still in New York, do you still go to all your doctors in your home state, where do you keep possessions that are of value to you?

“New York has recognized that people who say they move to Florida really are still New Yorkers,” he says. “They raise tens of millions of dollars auditing people on this.” New York isn't alone in this, so it's important to talk to your tax adviser., he says.

Besides income tax, the other two big taxes to consider are property and estate taxes, says Kehoe. Property taxes are fairly easy to research, as a lot of real-estate firms post them on their websites and local real estate agents can help you determine that, says Kehoe.

Estate and inheritance taxes are slightly more complicated: Everyone is allowed the federal estate tax exemption ($5 million per person or $10 million per married couple), but some states have their own estate and inheritance tax rules with thresholds lower than the federal. “An individual could be subject to a state estate or inheritance tax even if not subject to the federal tax,” says Kehoe. Other taxes to consider are sales tax, use tax, taxes on cars and tolls, he says.

Rental market

More than nine in 10 vacation home buyers plan to rent their new property within 12 months, and 71% said rental income influenced their decisions to buy, according to a study by NAR.

Dennis Evans, 70, who owns the Tunnel Hill Winery in the Lake Chelan area in Washington, and his wife Jaclyn, fall into this category. Though she's lived in Washington for years, Jaclyn missed the warm weather in her native California. In 2009, the couple bought a place in San Diego that was pricey, but they banked on renting it out.

“Rental the first year was very difficult, due first to unforeseen expectations of 20-something guests and then to higher than expected costs,” Jaclyn writes. Though it's been a tough journey with unforeseen costs and hiccups, Jaclyn writes that she believes the property will start breaking even in 2015.

With the growing popularity of home rental sites like HomeAway.com and AirBnb.com, many assume renting will be a cinch‘and cover a good portion of their mortgage. But you have to pick the right place if you want to make this work and consider the associated costs.

Pick a property you'll love and that renters will pay for, experts say. Location can help ensure your property is rented often, she says Kimberly Smith, co-founder and CEO CorporateHousingbyOwner.com, a housing rental site. Look for places that are near the main attraction of the area, like the city center, beach or theme park.

Jon Gray, the senior vice president in North America of vacation rental site HomeAway.com, suggests that you think about the kind of people who will be renting the place. “In Orlando, you're most going to be renting to families so a lot of bedrooms makes sense, but other areas get more couples,” he says. Do you homework online to see what other amenities rentals in your area are offering.

Other costs

While you might find a decent deal on a home and low tax rates in a somewhat remote or less touristy area, your cost of living may go through the roof because it's hard to ship things like food and supplies to the area.

Take Hilo, Hawaii: Though real estate here is significantly cheaper than a top Hawaiian retirement spot like Kaanapali, you'll still find the same high cost-of-living you do elsewhere in the state. Food in Hilo costs 54% more than the U.S. average and utilities cost 56% more, according to Sperling's Best Places.