If you are on this article, it is because you are looking for information regarding the difference between selling a property used as a first home and selling a property used as a principal residence.
Well, if arrived at the right place!
Let's start with definitions:
A first home is a property purchased with First Home Benefits. This means that at the time of purchase you possessed all the characteristics to apply for and obtain the "discount" on the registration tax (or vat if you buy from a construction company) that the state grants to holders of these requirements.
On the other hand, the principal dwelling is the property in which you can prove that you (the owner or family members) have lived in it for more than 50 percent of the time for which you have owned it (e.g., a house that I have owned for 24 months and lived in for more than 12 months) to prove this I must have factual evidence of my residence in the house, viz:
- The certificate of residence
- Utility bills headed with proof of consumption
- Telephone contract of a landline with related consumption
- Anything the IRS might require in case of an assessment (place of employment, evidence of travel etc)
The myth to dispel is that a first home is not always a primary residence:
There may be cases where, after making a purchase as a first home, one finds oneself in the condition of having to relocate for work reasons, or second homes where one resides most of the time.
Why is this difference important?
Whether or not a property is a principal residence goes to affect me (and not a little) on the taxes on the capital gain if I resell the property within five years of purchase. In fact, if I resell a house used as a principal residence within the 5 years of purchase even gaining a substantial capital gain, the IRS cannot ask me for taxes on this gain.
Of course, this is not automatic, but must be proven in case of an IRS assessment.... but knowing this difference can save you a lot of money.
