Define: Principal Residence

A principal residence, also known as a primary residence or main residence, refers to the primary dwelling where an individual or family resides and considers their home base. It is typically the place where they spend the majority of their time and where they are registered for voting, receive mail, and conduct other important personal affairs. The principal residence holds legal and financial significance, particularly in taxation and property law. For example, homeowners may be eligible for tax benefits or deductions related to their principal residence, such as the mortgage interest deduction or property tax deductions. Additionally, in property law, the principal residence may be protected from certain types of creditors’ claims or eligible for homestead exemptions, depending on the jurisdiction. Overall, the principal residence is an essential aspect of individuals’ lives and has various legal implications related to taxation, property rights, and personal finance.

principal residence refers to the main home where a person lives. In addition to a single-family home, a principal residence may be an apartment, houseboat or trailer. For example, Mr Smith spends nine months out of the year living in a rented apartment and three months in a single-family home. In this case, Mr Smith’s principal residence is the apartment rental. The IRS has several tax provisions that are applicable to a taxpayer’s principal residence. A few of these include the deductibility of mortgage interest (on a principal residence as well as a second home), exclusion of capital gains taxes on the sale of your principal residence (under certain conditions), and the deductibility of real estate taxes paid on your principal residence.

In order to meet the criteria to qualify as a principal residence for purposes of capital gains tax exclusion, a taxpayer must meet the ownership and use tests and also not have excluded gains from the sale of another home in the two-year period prior to the sale of the current principal residence. The ownership test requires that the taxpayer has owned the principal residence for at least two years, whereas the use test requires that during at least two of the prior five years the taxpayer has occupied the principal residence.

The following IRS publications provide further details on taxes as they relate to a taxpayer’s principal residence:
IRS Publication 523: Selling your home
IRS Publication 530: Tax Information for Homeowners
IRS Publication 936: Home Mortgage Interest Deduction

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th April 2024.