How to Use Your Rental Property as Your Primary Home

How to Use Your Rental Property as Your Primary Home
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“Primary residence” is a term used by many mortgage companies, FHA loans and the IRS. This term refers to the house in which you live. If you are applying for a second mortgage, refinancing a loan or opening a home equity line of credit, you will probably find that the interest rate offer is much lower for the home you live in and higher for your rental property. The sale of a house can also affect the taxes you owe depending on if that home is deemed a rental or primary residence. When selling a rental home, you may be subject to paying taxes on the profit made from that sale of the property. Such taxes do not always apply to primary home sales, however. By changing your rental property to your primary home, you can save money.

End the rental lease or contract with your tenants in the rental property. You can do this by giving a 30-day notice and staying within your state’s laws for asking current tenants to leave the home.

Move into the rental property. Live in the property for two years before selling the home if you want to take advantage of tax breaks when selling a primary residence. According to the IRS website, “You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the five-year period ending on the date of sale.” Most mortgage companies view one year of residency as meeting the primary home definition.

Change all of the utilities into your name and your home’s address. With the home once used as a rental property, the bank may require proof that you live in the home. Often utilities bills such as the electric or gas bill showing your name and the property’s address as the billing address will prove you live in the home.

Change your driver’s license and car registration address with your state’s department of motor vehicles. This is one of the criterion the IRS uses to determine which property is your primary home.

Register to vote with your new address. This is another criterion for determining residency used by the IRS.


  • Primary residence rules have exceptions such as for those who become disabled or the property is destroyed. Work with a mortgage and/or tax professional if you feel special circumstances apply to you.