What Is a Primary Residence?

A family cooks a meal in its home.

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A primary residence, or principal residence, is a home you live in for the majority of the year.

Key Takeaways

  • A primary residence, also referred to as a principal residence, is the home you live in for the majority of the year.
  • If you own one property and live there the majority of the year, that’s considered to be your primary residence.
  • If you own multiple properties, the IRS utilizes a “facts and circumstances” test to determine primary residence.
  • Owning a primary residence comes with certain benefits, such as potentially lower mortgage rates, a capital gains tax deduction, and the mortgage-interest tax deduction.
  • In comparison, an investment property is a home you plan to flip or rent out for profit.

Definition and Example of a Primary Residence

Your primary residence is the home you live in and spend most of your time in. You can’t have more than one primary residence.

You’ll likely qualify for lower rates when you buy a primary residence as opposed to an investment property. Your primary residence also will come with certain tax benefits.

You may be surprised to learn that your primary residence doesn’t necessarily have to be a single-family house. Apartments, condos, and townhomes can all be considered primary residences, as can boats or mobile homes. If it’s the place you live and spend most of your time in, it’s considered a primary residence.


A vacation home, investment home, or secondary home does not qualify as a primary residence.

How a Primary Residence Works

When you apply for a mortgage, your lender may ask how you plan to use the property. If you plan to live in the home for the majority of the time, it’s considered your primary residence.

If you own and live in one home, that’s automatically classified as your primary residence. But if you own multiple properties, the IRS uses a “facts and circumstances” test to determine your primary residence.

Here are some factors that are used to determine if your property is a primary residence, with the more of these factors being true, the more likely your home is to be your main residence:

  • It’s the home where you spend the most time.
  • The home is listed on your driver’s license, federal and state tax returns, voter registration card, and as your U.S. Postal Service address.
  • The home is near your work, your bank, the residence of other family members, and clubs or religious organizations you participate in.


Determining primary residence is fairly straightforward if you own one property, but even those who own a second home may qualify for the mortgage interest deduction. However, it can get tricky if you divide your time among multiple properties throughout the year. Please check the IRS guidelines to determine primary residence.

Benefits of a Primary Residence

If you’re new to homeownership or considering buying a home, you may not be aware of the benefits of owning a primary residence. Here are the most significant benefits to consider:

  • Mortgage rates: Mortgage rates tend to be lower for a primary residence than for a secondary home or investment property. A lower interest rate can save you thousands of dollars over the life of the loan.
  • Capital gains tax deduction: If you sell your home in the future, you may qualify for exemptions on your capital gains taxes if it’s your primary residence. You can exclude the first $250,000 in gains if you meet the principal residence requirements. That number increases to $500,000 for married couples filing jointly.
  • Mortgage-interest tax deduction: The interest you pay on a mortgage for your primary residence is tax-deductible up to a certain amount. Per the IRS, individuals or single filers can deduct their mortgage interest on the first $750,000 owed. If you’re married and filing separately, you can deduct the interest on the first $375,000 you owe.

Taxpayers who took out a mortgage after Dec. 15, 2017, can deduct only the interest paid on up to $750,000 or $375,000 for married couples filing separately of their mortgage debt. The mortgage interest deduction limit for home loans originated before Dec. 16, 2017, is $1 million for individuals and $500,000 for married couples filing separately.

Other items or costs that might be deductible from your taxes include prepaid interest or mortgage points, eligible late payment charges, prepayment penalties for paying off the loan early, mortgage interest paid before the date of sale, and interest paid if participated in the Hardest Hit Fund and other emergency loan programs.

Primary Residence vs. Investment Property

Primary Residence Investment Property
You live in the home for most of the year You have no plans to live in the home
The home is usually located near your work or clubs and organizations you’re involved with You plan to rent it out the property to tenants for income
You begin living in the home within 60 days of closing on the property You plan to flip the home to earn a profit

A primary residence is a home you live in for the majority of the year. It’s usually located near your work or any organizations you’re involved in, and your tax documents typically support that it’s your primary residence. If you recently bought a primary residence, your mortgage may require that you begin living in the home within a certain time period, such as within 60 days of closing on it.

In comparison, an investment property is a home you have no plans to live in. People usually buy investment properties to flip them for a profit or rent them out for recurring income.


Investment properties are seen as riskier, so they tend to come with higher interest rates and credit score requirements. If you’re looking to buy an investment property, you should plan on making a down payment of at least 20%.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Legal Information Institute. “Residential Loans.”

  2. IRS. “2021 Publication 523.”

  3. Internal Revenue Service. "Publication 936 (2021), Home Mortgage Interest Deduction, Qualified Home."

  4. IRS. “Publication 936 (2021), Home Mortgage Interest Deduction.”

  5. Lendingtree. "Home Mortgage Interest Deduction: What’s Deductible in 2022?."

  6. Freddie Mac. “Guide Section 8405.1.”

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