Sell primary to pay off vacation property

[Loyas5]

What happens if I sell my primary residence to pay off our vacation home to convert to new primary residence

[DoninGA · Accepted solution]

What you do with the gain from the sale of your personal residence is not relevant.  Paying off the mortgage on the second home is not reported on a tax return.

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.