How does the IRS define primary residence?

September 09, 2020 by Karen Thomas-Brandt, EA and Carolyn Richardson, EA, MBA
house

Res-i-dence (noun): A person’s home; the place where someone lives; the act or fact of dwelling in a place for some time; a building used as a home.

A primary residence is a seemingly simple concept – everyone knows where they live, right? But when it comes to your primary residence in a tax sense, many taxpayers find it difficult to determine where that primary residence might be. Is it where I spend most of my time? Is it where I work? Is it where I own a home? And, my favorite: Is it where I will pay the least tax? To add to the complication when it comes to taxes, a primary residence is not the same thing as a “domicile” or “tax home” when it comes to certain tax benefits and burdens.

Identifying your primary residence is especially important if you have sold a home. For tax purposes, the sale of a primary residence is treated quite differently than the sale of a second home or a mixed-use home (a home used personally for part of the year and rented out for part of the year). For instance, if I (and my spouse) sell our primary residence where we have lived the last two out of five years, we might qualify to exclude up to a $500,000 gain. On the other hand, if this is our second home or a mixed-use home, such an exclusion would not be an option for us. There may also be state tax benefits associated with your primary residence that you don’t want to miss out on, such as homestead exemptions or heating oil credits.
 

Where do you spend the most time?


The IRS indicates that the most important factor in determining your “primary residence” is where you spend the most time. For many taxpayers, though, that may be difficult to determine, particularly for taxpayers who have more than one home. However, if you live in more than one home, there are other factors to consider. These factors are:

 

  • The address where you are registered to vote.
  • The address you use on your federal and state tax returns.
  • The address listed on your driver’s license or car registration.
  • The address on file with the U.S Postal Service.

 

The length of time any of these factors have applied to that particular dwelling may also be an influencing factor in determining a primary residence for tax purposes. The address where you have voted and filed your returns from for many years is less likely to be questioned than one you used for one or two years. In addition, the IRS considers your primary residence as that residence close to:

 

  • Where you work.
  • Where you bank.
  • Where your family members live.
  • Where you are part of a club or organization.


Some situations in which you might need to consider these factors are:

 

  • You and your spouse “summer” in one state and “winter” in another state; you also split your time between states and travel during the other months. In this situation, you may need to count actual days/nights spent in each state or consider the other factors, such as the state in which you are registered to vote or the address on your driver’s licenses, OR
  • You and your spouse live in separate states and, therefore, separate residences the entire year, visiting each other on the weekends. In this situation, you may each have your own primary residence, in two different states.


In summary, the IRS generally considers your primary residence to be the home where you spend the most time. If you split your time between more than one house and are trying to determine your eligibility to exclude gain from a home sale from your taxable income, be sure to take a look at the numerous factors the IRS considers when determining your primary residence.

SEARCH

 

Karen Thomas-Brandt, EA
Resource Manager

 

Karen Thomas-Brandt, EA, is a Resource Manager at TaxAudit, the largest and fastest-growing audit defense service in the country and the exclusive provider of TurboTax® Audit Defense. With more than 17 years in the tax field, Karen has prepared thousands of tax returns and defended hundreds of taxpayers in audits. In her current role, Karen specializes in coaching and mentoring tax professionals so that they have the skills to best represent our members and love where they work!


 

Recent Articles

IRS Audit Written on a Paper
The length of an audit depends heavily on the issues being addressed, the level of documentation required, and the Examination Division doing the audit.
Baby with bottle
The cost of baby formula for your own infant is generally not considered something you can write off on your taxes. However, there are exceptions.
Economic Hardship
CNC status is for taxpayers who cannot make any tax debt payments without seriously jeopardizing their ability to pay for their basic living expenses.
Jar with coins in it that says Tax Pay
The IRS can attempt to collect unpaid taxes for ten years from the time the tax was assessed. The IRS can try to collect the tax in a variety of ways.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.