Tax question--I own 2 homes, 1 in CO. & 1 IN az. I live in each house for 6 mo's. Which home is primary?

Question

I am retired and only income is soc. sec. Is thier an advantage to claiming one home over the other as primary?

Answer 1

Besides using the state of your driver's license, other things that a tax auditor would look at to determine your state of residency would be: car license plate, voter registration address, address for insurance policies and address that social security would use to contact you. The house in that state would be your primary residence. Assuming the mortgages on both homes are paid off, there's not a lot of difference for which home is primary. If you do still have mortgages with substantial amounts of interest (and enough deductions to itemize), then possibly the home with the most mortgage interest could benefit you as being primiary. But you need to make sure your car license, voting address, drivers license etc all agreed with that choice. Thus you might have to go through quite a bit of effort (and costs) to change all those if they're different than your current situation, so make sure you take those things into account. Your car insurance premium could well factor into the equation if one home is in a rural location and the other is in a city.

You say you only have social security income, but I'm thinking you might have savings interest and investment income. Those would be taxable income, so you'd need to look into which state has higher income tax rates on those income sources as part of making your decision. One state may have a bigger credit for seniors that could sway your decision. Only after weighing the costs of licenses, insurance and then going through a "test run" of the tax forms in both states would you really know which one is financially better for you. But also realize that the laws are subject to change, so you'd need to continue to monitor the news about tax developments in both states to avoid a rude surprise a few years down the road. This is especially true if either state encounters major budget woes.

Answer 2

Here in MN, we have some snowbirds too (obviously!) I thought I had read in the newspaper that you had to claim the house you lived in for the most time as your primary residence. I'm no expert, but I thought I read it! Since there are 365 days per year, one residence has to be lived in more than the other...even if just by 1 day!

Answer 3

There's no tax advantage until you sell one of them. If you sell your primary residence and have lived in it for 2 of the 5 years prior to the sale you can exclude $250,000 ($500,000 if married filing jointly) in gain on the sale from income taxes.

Whichever state you are registered to vote in is your legal domicile. If you're not registered to vote (and shame on you if you aren't) then the state that issued your driver's license would be the next best bet.

Answer 4

Which state is your Driver's license in? I'd go with that one.

Answer 5

I would say that the first home that you bought would be your primary one.