What is 'Principal Residence'
The primary location that a person inhabits. It doesn't matter whether it is a house, apartment, trailer or boat, as long as it is where you live most of the time.
BREAKING DOWN 'Principal Residence'
In most cases, tax payers must pay taxes on capital gains from the sale of any property. However, when you sell your home of primary residence, you could qualify for exclusion of $250,000 ($500,000 if married filing jointly) gain if you meet the following requirements according to the IRS (2017):
1. You owned the home and used it as your primary residence in at least two of the five years preceding the sale of the property.
2. You didn't acquire the home through a like-kind exchange in the past five years
3. You did not exclude the gain from the sale of another home two years prior to the sale of this home