What Makes Your Home A Primary Residence
REM #F663
By Ilyce R. Glink
Summary: A reader has purchased a home for their future retirement. They would like to designate their new home as their primary residence. Ilyce explains what the IRS will look at to determine what home is the primary residence.
Q: We just purchased a house for future retirement use and declared it not
a primary residence during the transaction.
We would like to know how we can change it to the primary residence while still keeping our current residence. Thanks.
A: You can only have one primary residence at a time. Simply declaring to the
world that your new home is actually your primary residence isn’t quite
enough. You actually have to live there for a majority of each year.
If you're ever audited, the IRS will look up your phone records, bills paid,
whether you voted in that district, and other things that would indicate how
much time you spent in the new home. You would also have to file your income
taxes listing the new home as your primary residence.
When you're ready to retire to this property, that's the time you should make
it your primary residence. That way, you protect your ability to take the IRS
capital gains exclusion for your current property, which amounts to taking the
first $250,000 in profits tax-free (up to $500,000 if you're married). But you
only get this as long as you've lived in the house for 2 of the last 5 years,
and haven't used the exclusion in the past 24 months.
For more details, talk to your tax preparer or accountant.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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