There are going to be moments when life changes and you’re going to need to make a move to work things around. Sometimes, this means that your second home ends up being the home that you spend most of your time in, rather than just a summer home. When your second home becomes your primary residence, many people assume that it’s just a quick move, but you'll need to follow the proper steps to make everything official.
Yes, you can convert your second home to your primary residence. To make your second home your primary residence you'll first need to move into the home. Then, you'll make it official by taking the necessary steps to update numerous government and business entities of your new primary residence. This typically includes things like notifying your employer and accountant and changing your driver's license and voter registration.
First Things First: Move In
Before you can claim your second home as your primary residence, you will need to move in and make sure that you have written proof. This can be done by doing the following:
- If you had other people living in your second residence, get them to leave. You can do this via a verbal request in most cases. However, some may require sending a lease termination letter or even an eviction.
- Put all the utilities in your name. This is a must, and they must be turned on.
- Forward all the mail to your new primary home. This, too, acts as a method of proof.
- Notify your employer, banks, and insurance agents of the move. They need to be notified in writing or via digital means. You’ll need to complete an address change form at the post office, too.
- If you have children, contact the local school board to ensure they’re signed up for classes. Some schools will allow your kids to start mid-year, while others won’t. It’s good to know what to expect.
- Prepare to spend the majority of your time in your primary residence. You will need to spend at least 183 days here to have it be your primary residence officially.
Next: The More Official Business
Once you’ve moved in and gotten yourself situated, you will have to make sure that the IRS also acknowledges your new home as your primary residence. Otherwise, you will still be paying taxes to the wrong municipality. Here’s how you do this:
- Update your voter registration. You can do this online or by visiting your local office. (Due to COVID-19 restrictions, it may be possible that online registration is the only way to do this.)
- Update your driving license. This is a must if you are going to be living there for an extended period of time, and is also a test the IRS uses for residency.
- If necessary, visit your county appraiser’s office to file for homestead. This depends on the state that you choose to move to. Your appraiser will allow you to file for homestead, which will help you get property tax exclusions. This should be done as soon as you move in.
- Notify your accountant, and list the address as your residence on both state and federal tax returns. This is the only way to ensure that you get the full tax benefits that come with moving into your second home.
- Discuss any issues you may have with a 1031 exchange with your accountant. If you are getting another home through the 1031 exchange, you need to discuss this with a tax professional.
Completing the above is an essential part to converting your second home to your primary residence.
Though most people who convert their secondary home to their primary home eventually sell off their former primary residence, this isn’t always the case. There is no law requiring you to sell off a house simply because it is not your primary place of living anymore.
Technically, it's possible to have two primary residences. However, most people don’t qualify for this. For you to have two primary residences, the following have to be true:
- Your family has to be too large to fit inside one home entirely. This could mean that you have a family of six or more.
- The LTV ratio is 75 percent or lower. If you’re still just starting to pay off the loan, you won’t qualify.
- Some states will also want to see that you’re paying bills on both. So, for example, the utilities will need to be in both names.
There are going to be many things you need to do to get your second home converted into your primary residence. It’s not as simple as just spending extra time there. It’s a process that involves switching over all your paperwork, updating all your IDs, switching your mail, and making the switch when it comes to taxes.
The bigger issue, for most people, isn’t the paperwork or the lifestyle change. It’s taxes. If you are concerned about capital gains taxes or anything similar, it’s best to discuss it with an accountant. After all, taxes are tricky, and it’s better to be safe than sorry.