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. 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. Learn more about what it means to have a primary residence.
When you own two homes, and one is a renovation that you planned to flip, where should you live? It depends in part on the tax consequences of selling the homes. It may make sense to move from your current home into the renovated home so you will pay lower capital gains taxes on the home sale. You can live in the renovated home for a few years and then sell it as well for more profit and a better capital gains tax amount.
With real estate investments, you need to evaluate your options and time the sales appropriately to make the most of your investments. Will the property continue to appreciate? What do you want to do with the money? Will you ever make the investment property your primary residence?
Even if your property is considered farm land, if you use the property as your primary residence, you are eligible to take the capital gains deduction. To take the deduction, you must have lived there as your primary residence for at least two of the past five years.
A change in the tax code now permits you to take up to the first $250,000 in profits tax free when you sell your home. If you're married, you can take up to $500,000 in profits tax free. You must have lived in this home as a primary residence for 2 of the last 5 years. If you've lived in the home less than 2 years, you may take a proportionate share of the profits tax free.
Buying a home increases assets and builds wealth. The federal government introduces programs from time to time to encourage home ownership, especially for minorities. Learn about the housing market including federal government programs that are aimed to boost home ownership levels.