Also known as a primary residence, a principal private residence is the home that the owner considers his or her main personal residence for legal and tax reasons. Tax agencies in different nations establish criteria for determining whether the home actually qualifies as a primary residence, with most nations requiring that the owner reside on the property for at least half of the tax year. The family unit, whether an individual, couple, or a couple with minor children, can only have one primary residence. Any other homes owned and used by the family unit are identified as secondary residences.
A principal private residence can be any type of dwelling that is located in an area zoned as a residential area. This means that houses, mobile homes, houseboats, apartments, duplexes and even older business structures that have been converted into lofts or condominiums are usually eligible for classification as primary residences. National tax laws in different countries usually include specific instructions about what types of dwellings meet this criterion, and which cannot be designated a primary or principal residence.
Identification of the principal private residence is also important for a number of applications. Typically, jurisdictions that issue driver’s licenses require applicants to provide the physical address of their primary residence. The same usually is true when supplying an address for credit card or loan applications. Investors usually must provide the address of their principal private residence when purchasing different types of securities such as stocks or bonds. Even schools typically require an address to a primary residence when registering a child, sometimes as a means of ensuring that the child does actually reside in the district that is served by that institution.
In many nations, designating a principal private residence is important for tax purposes. Often, that residence is not subject to capital gains tax, as long as the owner continues to hold title to the property. That may or may not be true with a secondary residence, such as a vacation home that is used a few months each year. Depending on federal tax laws that apply, capital gains taxes may be assessed when the property is sold at a profit, with those taxes assessed for the tax year in which the sale was completed. This is not universally true, as there are nations where no capital gains taxes are owed if the sale involves the home that was previously identified as the principal private residence.