Through May, year-to-date home sales (that’s non-adjusted existing- and new-home sales combined) are up 6 percent over last year, which was the best year since 2007, according to realtor.com calculations using National Association of Realtors and Commerce Department data. Meanwhile, home prices are again up 5 percent to 6 percent, according to Case-Shiller and other sources.

While some would-be buyers are being hindered by low inventory and tight lending, this is the strongest performance we’ve seen since the housing boom.

During the boom, loose credit enabled unsustainable increases in home ownership as well as speculative over-building. We all know what happened next.

Today we still haven’t recovered completely. For instance, right now we’re building only about half the new homes we need to keep pace with the number of households being formed.

That’s happening in part because the construction industry is having a tough time accessing credit – which is also a problem for consumers. Credit for would-be homebuyers has tightened this year as mortgage rates have fallen to new three-year lows.

Tight credit is limiting new home supply as well as existing home supply. Many homeowners who bought 10 or more years ago wouldn’t qualify for a similar mortgage today.

We continue to see fewer homes for resale compared to a year ago. In fact, the supply of these homes has been well below normal for the last 45 months. It is no wonder then that the inventory available in recent months moved at the fastest pace so far in this recovery, staying on the market for a median of only 65 days, according to realtor.com.

Despite these challenges, things are still looking good.

For at least the next 15 years, the two largest generations in history, millennials and baby boomers, will be making critical decisions about where and how they want to live.

Millennials are entering their prime household formation and buying years. They already dominate the home buyer pool, and the ranks of millennial home buyers will only grow from here.

Meanwhile more than 3.5 million baby boomers turn 65 this year. Those numbers grow as well, reaching 4.5 million a year in a decade. We are seeing that “65 is the new 55,” when it comes to boomers taking action on their retirement housing plans.

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There’s simply nothing like a vacation home—the escape from everyday life, the solitude, the relaxation. Also: the extra upkeep, extra mortgage, extra hassle. It’s little wonder that when the seasons start changing, many people start thinking more and more about shedding a no-longer-needed vacation home. All good things must come to an end (or so we’re told).

But do it right. When it comes time to sell your getaway, there are some things you should know about taxes.

“We do have a lot of clients that end up selling a property and have a huge tax bill,” says tax expert Ryan Parker. “If you’re thinking about selling it, the first thing you should do is do some tax planning.”

And a lot of people could use that advice: 920,000 vacation homes were sold in 2015, the second-highest number since 2006, the National Association of Realtors® reported in its 2016 Investment and Vacation Home Buyers Survey.

But selling a vacation home is not quite like selling your primary residence as far as Uncle Sam and the IRS are concerned. Here’s a guide to what you need to know, according to the tax laws for 2015 (and be sure to stay attuned throughout the year for any changes for 2016).

Selling a vacation home is just like selling stock

The proceeds from the sale of any home that you own are considered capital gains. Although the IRS will cut you a break when you sell your primary residence (the first $500,000 in profit for a married couple is exempt from taxes, $250,000 for a single person), that’s not the case for a vacation home. You’ll pay a capital gains tax just as if you had sold some stock shares.

The two key variables are your income tax bracket and what you paid for the home. For 2015, the capital gains tax was no higher than 15% for most taxpayers, according to the IRS. Those in the very top bracket had to pay 20%.

You pay capital gains taxes on the net proceeds from the sale of your home, or the money you received for your house when you sold it minus the combination of closing costs and what you paid for it. You may hear references to your basis—that’s taxspeak for what a house originally cost.

If you bought a house for $200,000 (that’s your basis) and sold it for $300,000, with closing costs of $10,000, you would pay tax on $90,000. That could be 15% or higher, depending on your tax bracket.

(Selling a primary residence is subject to capital gains taxes, too, but the first $500,000 in profit for a married couple is exempt from taxes; it’s $250,000 for a single person.)

Keep track of what you spent on improvements

The money you spent on home improvements increases your cost basis—and that reduces the net proceeds. You must keep records of all improvement costs. If you spent $25,000  adding a rec room in the above example, that would make your basis $235,000, cutting your taxable gain to $65,000.

And sorry: Improvements, for tax purposes, don’t include routine maintenance. After all, fixing a leaky faucet or patching some plaster doesn’t add to your home’s value—it just keeps the place working and in good shape. We know, bummer.

Understand what depreciation means

Owners of vacation properties who’ve been renting them out can deduct depreciation—the wear and tear on a property that lowers its value over time—when filing their annual taxes. Taking depreciation annually can lower your income tax payments on the rental income you receive, but it also lowers the basis you claim when selling. And that, in turn, increases your capital gain.

An annual depreciation of $5,000 for 10 years on that $200,000 vacation home you rented out, would be $50,000 in total depreciation. If you sell the house for $300,000, you’ll pay capital gains on $150,000: your $100,000 gain plus the $50,000 in depreciation that gets subtracted from the basis.

Know the residency requirements

Another way to cut capital gains taxes is to make your vacation home your permanent residence. If you live in a home two of the five years before you sell it, it is considered your permanent residence by the IRS. States have varying residence requirements, so it’s best to check with the one in which you live. Proof of primary residence includes the address on your driver’s license, utility bills, and where you register to vote.

Don’t sell it, swap it

A1031 exchange is a special tax provision that allows you to put off paying tax on the sale of your vacation house. How? It involves swapping your house for another of similar value. This can be used only for investment properties, so you must be renting out your vacation home to swap it, and you must swap it for another vacation rental. Got that? You then need to wait five years before you can make the new rental your primary residence. Finding swap partners usually requires using a firm that specializes in setting up such deals. Note: You’ll postpone, not eliminate, paying taxes on your place.

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Living in Southern California, we are spoiled by the climate, location, and homes. Although many of the homes here would be considered mansions in other parts of the world, there is a distinct difference from a luxury home. We have compiled a list of tips from the experts to buying the right luxury home.

Learn the search process

Many luxury homes are not listed in order to protect the seller’s privacy. Many of these homes are found through the agent’s personal connections, not the traditional MLS. You may need to find more online sources as many of these homes aren’t on the large search engines.

Go beyond the photos

Many large homes are not photogenic, don’t dismiss a home simply on its front evaluation photos. It’s best if clients check out the property in person before they make any further decisions.

Work with a local expert

Working with a local expert will prove to be the most successful. Since many luxury homes are found through personal connections, many homes have to be viewed through appointments vs. open houses.

Bank your relationships

It’s best to go to the bank in which you have the strongest relationship. There you can obtain your portfolio so you can receive a pre-approval letter, faster.

Document everything

There is much more scrutiny in the high-end market. It is important to keep financial documentation for the bank’s purposes.

Hire reliable advisors

Your real estate agent will make suggestions for you, it’s best to hire one that is knowledgeable and has your best interest at heart. Having an agent or financial advisor that you trust is crucial to this process.

Don’t forget about title insurance

Title insurance is important to have to protect yourself against any problems that may occur.

Look into the future

Look into the future of the area surrounding you. You never know if someone will come along and build a bigger home that blocks your view of the ocean.

Know what to expect with cooperatives and condominiums

Know the ins and outs of co-ops and condos. It is also probably a good idea to hire an attorney to represent you and to research the building on its financial viability.

There’s room to negotiate

It’s usually the unique designs and remodeling that make these homes impress and the price even more so. Have your agent research comparable properties that have recently sold so you can get a better idea of the value of the home before you make an offer.