Capital Gains Exclusions

Real Estate

Capital Gains Exclusions

Determining your principal residence, according to the IRS for tax purposes, if you own more than one home can be tricky, but the IRS continues to refine the rules. First of all, principal residence can take many forms: conventional home, condominium, mobile home, house trailer, a coop unit—even a boat, as long as it has sleeping, cooking and a bathroom.

The difficulties arise when you split your time between two different properties during a year. Simply put, the IRS says that your principal residence is the home you own and use as a residence for “a majority of the time during the year.”

But of course, there are other considerations. For instance:

l the location of your property in relation to your place of employment.

l the location where your family members reside.

l the address you use on your federal and state tax returns, driver’s license, automobile registration and voter registration card.

l the mailing address you use predominantly for bills and correspondence.

l the location of your banks.

l the location, believe it or not, of your “religious organizations and recreational clubs.”

 

To make sure you are categorizing your primary residence correctly, make sure to include this topic in your annual meeting with your CPA.