In the U.S., if you own more than one home, you are involved in the concept of a primary residence, the basic home owned by every single or married person, as distinguished from other homes, such as investment rentals, vacation condominiums, etc.
For non-U.S. tax residents, who generally do not reside in the U.S., the purchase of U.S. property generally does not distinguish whether it is a first home or a second home, as there is no difference between the two for tax reporting purposes.
However, if a buyer uses his first home for residential purposes and is ready to purchase a second home for investment and rental purposes, he may face different policies from the U.S. government regarding purchase and possession.
Loan costs will increase.
Buying a property is a popular investment avenue for investors. Most people will buy multiple properties to invest and collect rent, but for those buying a second home, the down payment and interest rates will be higher than for the first home.
In the United States, the main concern of all lenders is the borrower's ability to repay the loan. One of the biggest obstacles facing home buyers is how to prove that they have sufficient repayment capacity.
If you don't have enough income to prove that you can afford to pay off your debts and pay off your mortgage, it's almost impossible to get a loan.
In light of this, a little-known lending rule lets you prove that you have more income, which means you just need to turn your new home or the home you live in into a rental property.
Different tax credit benefits
The government allows homebuyers to deduct the interest on the loan on their primary residence from their income when they pay taxes, which amounts to a big discount for homebuyers.
If a taxpayer wants to sell his home, he will have to pay federal capital gains tax. However, if the primary residence is sold and the head of household has lived in the home for at least two years in the last five years, the profit on the sale of the home is less than $250,000 for the individual and no capital gains tax is due on the portion of the sale that is less than $500,000 for the couple. This benefit is limited to primary residences.
The 1031 property exchange provision applies to home exchanges.
If the buyer changes homes, the 1031 home exchange provision applies. 1031 provision means that for an individual's investment home, if the new home is locked in within 45 days and delivered within six months, capital gains tax on the disposition of the original home may be deferred to the new home. This provision can be applied repeatedly.
For example, if a person buys a home for $1 million, sells it for $2 million, and then buys another home for $2.5 million after satisfying the requirements of the above provision, the previous $1 million in capital gains can be deferred to the new home without paying any capital gains tax.
Of course, if a third property is purchased after a subsequent disposition of the property, it can be deferred to the new property if it meets the terms and conditions, and so on, and can always be deferred for capital gains tax.
Also, the property exchange provision allows three homes to be locked in at the same time, as long as they do not exceed 200% of the value of the original property.
Finally, when you own two homes, the taxpayer is required to file a return with the government as the primary property.
The IRS regularly checks the payment of bills for the taxpayer's primary residence and whether it is a permanent residence, so it is difficult for the taxpayer to conceal the status of the primary residence.
