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State: Texas

I have two houses. I don't treat them as primary or secondary, they are both occupied. I am keeping them while I can, waiting for the value of one of them to go up sufficiently so I can sell it. Profit on one of them would be over the capital gains exception, the other one would be under.

I do have a few questions:

  1. What is the exact definition of primary vs secondary house? I get bills at both houses. Neither are rentals. I spend time at both, and my family may spend time at both, depending on where they need to be. Does which I homestead matters (right now I do it based on which has the most taxes)? I suspect I will need to sell one of the houses in about 1-2 years, and I need to establish that as the primary house for tax purposes.

  2. Are there any benefits to making one of the houses a rental property? Are rental properties treated differently than secondary houses at sale time, tax wise? I have been thinking about renting one out for income purposes, but not if it screws me up at sale time.

  3. If I sell the primary house and use the exception, how long do I need to wait until I can use the exception again on the second home?

Thanks for any input.

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The primary residence gets a $250K/person (assuming a couple) cap gain exemption on its sale. That's the main difference.

Your primary house is the house you spend more than 182 days at. Typically, it's where your license says you live, where your bills go, and for some, where their legal spouse (as opposed to mistress) lives.

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  • My question was, how do you definitely prove that one of the two houses is the "primary"? What exactly makes it primary?
    – Will I Am
    Jun 9, 2016 at 1:04
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    Actually living there for more than half the year, as @JoeTaxpayer said. I'm sure the IRS website has a description of what evidence is considered adequate to establish residency.
    – keshlam
    Jun 9, 2016 at 2:40

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