Primary Residence Means Living There Full Time

Added November 17, 2007 by Ilyce R. Glink

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Summary: In order to be able to take a capital gains tax exclusion when you sell your home, you have to have lived there at least two out of the last five years. This primary residence definition is critical to taking the tax exclusion when you sell. You cannot exclude capital gains from the sale of a vacation or second home.

Q: I have a question relating to the capital gains tax exclusion on the sale of a home.

It has to do with the "2 out of 5 years" time period. Suppose a couple occupies a vacation home 3 day per week for the last 10 years. Are they eligible for the exclusion? I understand that the years do not have to be consecutive, do the days?

A: In general, when you sell your home and it is your primary residence, you can exclude from federal income tax $250,000 (if you are single, or $500,000 if you are married) of the profits from the sale of the home. But you must have used the home as your primary residence for two out of the last five years.

In your case, you have indicated that the home was a vacation home and you didn't use it as your primary residence for two out of the last five years. You didn't even spend the majority of the week there, just less than half.

Because of this, you won't be able to exclude the gains from federal income taxes when you sell the property.

Nov. 17, 2007.

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