Principal Residence

Principal Residence

The place where one lives most of the time. The principal residence is important to persons who own multiple properties because vacation homes and investment properties are taxed differently than the principal residence. In particular, one is not required to pay capital gains tax on the sale of a principal residence, provided one then buys another principal residence of equal or greater value.

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Principal Residence

A principal residence is generally the home in which a taxoayer lives most of the time. A taxpayer who sells a principal residence that he or she owned and lived in for at least two years in the five-year period ending on the date of sale may be able to exclude up to $250,000 ($500,000 on a joint return if both spouses used the home as a principal residence for the required time) of gain from the sale. A taxpayer can have only one principal residence at any time. A principal residence can be a home, condominium, cooperative apartment, townhouse, mobile home, or houseboat.