Definition of Primary Residence
The primary residence is the home that you occupy for a majority of the year. This is where you reside, meet your financial obligations, and where your personal belongings are. The IRS defines this as the home where you have the greatest stake in. The IRS also requires homeowners to use this home as their main dwelling place as part of the criteria for claiming homeownership tax credits. However, the fact that you own more than one home or live in more than one place throughout the year does not necessarily make it impossible to file a tax return.Why having two Primary Residences is not allowed
The IRS requires that taxpayers designate a principal residence for tax purposes. This is because homeownership carries many tax benefits and deductions that are not available to renters. However, you cannot legally maintain two primary residences. Even if you divide your time evenly between two locations or alternate between two places when moving for work or for other circumstances, the IRS will require you to list only one property as your primary residence when filing taxes. Claiming two primary residences can raise so many red flags that it triggers cognitive efforts to review your tax return. If the IRS audits your tax return, they may question the legitimacy of claiming multiple primary residencies.Consequences of claiming two Primary Residences
The consequences of claiming two primary residencies can be dire and may result in unforeseen costs for you. As previously mentioned, you cannot maintain two primary residences, and if you do, the IRS will question your tax returns. The IRS may consider revoking your homeownership tax benefits, including deductions on mortgage interests, real estate taxes, and other related expenses. It’s worth noting that taxpayers who knowingly file a false tax return risk prosecution for perjury. If found guilty, you could face up to three years in prison and pay up to $250,000 in fines. Even if you are found not guilty of perjury, you may face hefty fines and penalties for a mistake on your tax return.Factors considered by the IRS to determine Primary Residence
The IRS considers several factors when determining your primary residence. Some of these factors include the following:- Where your family lives.
- Where you work.
- Where you receive mail.
- Your insurance policies.
- Your voter registration.
- The address on your driver’s license.
- Your utilities and other bills.
- The location of your business activities and bank accounts.