A primary residence is the place where a person lives officially for tax and legal purposes. If you own more than one home, the primary residence is the one where you live the majority of the year. You can only have one primary residence of record at a time. Your primary residence is the legal residence used on your driver's license, voter registration and vehicle registration. Your primary residence can be any type of physical dwelling with a legal address on file with the United States Postal Service. A primary residence can be an apartment, a condominium, a house, a duplex, a town home, a mobile home or a houseboat.

YOUR PRIMARY RESIDENCE AND YOUR TAXES

If you own more than one residential property, understanding what qualifies as your primary residence is important when tax time comes around. A common misconception is that a primary residence is the property a person has owned the longest. While this is often the case, it is only accurate if that residence is the one lived in the most during the year. Residences you own as income properties such as traditional rentals or vacation rentals are not eligible for classification as a primary residence. The key requirement for a primary residence is that the owner of the property must live there physically the majority of the year.

So how does your primary residence impact your taxes for 2018? With the tax plan enacted for 2018, you can deduct your mortgage interest from your tax return on home loans up to $750,000 for both your primary residence and your secondary (vacation) residence combined. The previous limit was $1,000,000. Depending on the mortgage amount of your primary residence, mortgage interest deductions for your secondary residence might be limited. If you take deductions for a secondary residence, it must be a residence occupied by the owner part of the year and it cannot be a property used as a rental or investment. Deducting mortgage interest from a loan for a property you earn rental income from on your taxes is considered mortgage fraud.

If you bought/finalized the mortgage for your primary residence in 2007 or later, you can include your mortgage interest payments as part of your mortgage interest total in your itemized deductions on your personal tax return. Note: This deduction is not applicable if you opt for the standard deduction rather than itemizing your deductions. For most homeowners, the mortgage interest deduction along with your other allowable deductions is often greater than the standard deduction amount, making it worth the extra time and effort to opt for itemized deductions when preparing your annual federal tax return.

For more information about how residence classification (primary/secondary) impacts your taxes, talk to your tax specialist or accountant. While it's wise to use all of the legal allowable deductions available to you, making a mistake on certain types of deductions can have serious consequences.