121(a), take advantage of the full Sec. For a second home, you can deduct property taxes on your tax return as part of the state and ... That includes property taxes you pay on your primary residence … If the IRS audits you they will look for certain records to prove a home is a primary residence. I rented 2 rooms to my daughter because she insisted on it. If my mother lives in our second home as her primary residence, can she pay the home's expenses (utilities, association fee, and contribute toward the mortgage payment), without those payments being considered "rental income" for me? Yes, you can change your second home to your primary home to qualify your second home for the Section 121 exclusion. Primary residence mortgages can be easier to qualify for than other occupancy types and can offer the lowest mortgage rates. Couples who are … Thanks for clearing it up Another way to reduce your tax liability is to turn your second home into your first home. I would be happy paying the tax on the value of my BTL property but just seems unfair paying it on the value of what will be my main residence. Selling Your Second Home . Q: What if client wants to convert their current home into a second home and purchase another primary residence? A primary residence is the home in which you spend the majority of your time. In order to claim a home as a primary residence you have to live there for most of the year. My office is in her home. Taxpayers in this position may convert their current primary residence into a second residence on or before January 1, 2009, and, assuming that the ultimate disposition of their current primary residence does not fall outside the five-year time period of Sec. In fact, Wohlner completely advises his financial planning clients against getting a HELOC to pay for a down payment on a second home. By law, you can only have one primary residence and it's used for such purposes as filing taxes, census taking, in-state tuition verification and other activities. Either way, the rules are the rules. How lenders define a primary residence. You can't claim a second home, a vacation home or a retirement home a primary residence unless you plan to live there most of the time. Make your second home your primary residence. “If you’ve primarily used the property as a vacation home, you’re limited in terms of ways to defer or mitigate your tax liability,” says Weinstein. 6 months’ worth of monthly mortgage payments for BOTH homes as a “cushion” Can be reduced 2 months’ worth of monthly mortgage payments if current home is 70% LTV or below; Qualify for both monthly mortgage payments You are leveraging your primary residence to purchase a second residence, which could cause you to lose your home if you fail to make your HELOC payments. 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