A primary residence is one that you occupy for the majority of the year and use as your permanent address on documents like your driver's license and tax returns. A primary mortgage loan is used to finance a primary residence. A second home is a property that you own but do not occupy most of the year.
Rules that test a primary home
Time spent in the home: You must live in the home for the majority of the year. Address on legal documents: Your primary home is typically the address you use on your tax returns, driver's license, and voter registration.
The CRA says that you should have lived or been living at the property during the financial year you claim for principal residence exemption. But it does not specify the number of days. It means you don't have to live in the residence full-time.
Primary residence rules
In general, the home that you live in most of the time is your primary residence. The IRS has a more precise definition: “If you own and live in just one home, then that property is your main home.
Or the lender might simply ask the borrower to provide updated utility bills, driver's license, or other documentation that confirms their current address to verify whether the property is being occupied as a primary residence.
If you use your former home to produce income (for example, you rent it out or make it available for rent), you can choose to treat it as your main residence for up to 6 years after you stop living in it. This is sometimes called the '6-year rule'. You can choose when to stop the period covered by your choice.
Generally, no, you can't have two primary residences at the same time for tax or mortgage purposes. Even if you split your time between a couple of places, only one can be your official "main" home. This is where you spend most of your time, get your mail, register your car and list on official documents.
Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors.
Common challenges when renting out your primary residence
You'll pay capital gains tax if you sell a home you haven't occupied. You'll have to manage the property. You may need additional insurance coverage for a rental property. You may face challenges with local zoning boards or HOAs.
Determine whether you meet the residence requirement.
If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement.
You can only claim one principal residence per calendar year, but there is no limit to the number of times you can claim the principal residence exemption in your lifetime – after all, people change homes throughout their lives.
Owning multiple homes gives you the opportunity to create a sustainable and passive cash flow stream. Each additional property adds to the total rental income, which can help cover mortgage payments, property taxes, maintenance costs and other expenses associated with owning multiple rental properties.
You'll need to add half of your profit to your income for the year. Because your profit was $100,000, you'll report $50,000 as a taxable capital gain. Your personal tax rate is then applied to the total amount of income you reported to determine how much tax you owe.
A principal residence is a housing unit that you own, either alone or with another person. Additionally, the property must be “ordinarily inhabited” by you, your spouse, or your children at some point during the year. “Ordinarily inhabited” is a fancy way of saying you must live there.
Most lenders require the property to be owned for at least six months before they will accept applications, regardless of your financial circumstances or credit history. The timing calculation for the six month mortgage rule begins from the HM Land Registry registration date, not the completion date.
A property usually stops being your main residence when you stop living in it. Usually when you move out of your home it stops being your main residence. However, you can choose to keep treating your former home as your main residence for capital gains tax purposes even if you no longer live in it.
Communicate with Your Mortgage Lender
Check your loan agreement to see if there are any stipulations regarding renting out your home. Notify your mortgage lender about the change in the use of the property. Some lenders may have requirements or need documentation to update your loan terms accordingly.
It allowed sellers to claim CGT exemption for the final 36 months of ownership, even if they had moved out. However, this was reduced to 18 months in 2014 and further to 9 months in 2020, which remains the rule today. This general law is in place as it prevents short-term transaction benefits concerning taxation.
No, you cannot rent out your house without telling your mortgage lender. In recent years there has been a crackdown on accidental landlords and back and mortgage lenders are making more of an effort to make sure the homes they are supporting are secretly being used as rented spaces or holiday lets.
Basically, the de minimis safe harbor allows businesses to deduct in one year the cost of certain long-term property items. IRS regulations set a maximum dollar amount—$2,500, in most cases—that may be expensed as "de minimis," which is Latin for "minor" or "inconsequential." (IRS Reg. §1.263(a)-1(f) (2025).)
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
Five Most Overlooked Tax Deductions
The 3X annual income rule
Another shorthand strategy is to cap your total mortgage at three times your salary. According to this guideline, if your household income is $80,000, you can afford to spend up to $240,000 on housing.
More and more married couples are choosing to live in separate homes. People call it “married but living separately,” or “Living Apart Together” or LAT, and it occurs more often than you might think.
The $100,000 Loophole.
Under this loophole, if the borrower's net investment income for the year is no more than $1,000, your taxable imputed interest income is zero.