Definition of primary residence for tax purposes with raw land purchase & farming plans?

The IRS generally defines your "primary residence" as the home you live in most of the time. For tax purposes, you can only have one primary residence at a time. If you genuinely move into the renovated cabin and it becomes the place where you actually live (receive mail, register to vote, etc.), then yes, it could qualify as your primary residence. The main tax advantage would be potential mortgage interest deductions. If you use the property as your primary residence for at least 2 of the 5 years before selling, you might also qualify for capital gains exclusion (up to $250,000 for single filers or $500,000 for married filing jointly). For the farming aspects, that would be considered a separate business activity. You'd likely need to file Schedule F for the farm income/expenses, which is separate from your personal residence deductions.

After going through a similar situation last year, I found this amazing tool at https://taxr.ai that helped me figure out the exact tax implications of my land purchase. I had 20 acres with a small cabin that I converted to my primary residence while starting a small organic farm. The tricky part was figuring out how to properly allocate expenses between personal and business use. Taxr.ai analyzed all my documents and showed me exactly how to structure everything to maximize legitimate deductions. They even helped identify farm-specific tax benefits I had no idea existed! The guidance was super specific to my situation, which was way better than the generic advice I kept finding online.

Just wanted to follow up and say I tried taxr.ai for my situation and it was incredibly helpful! I was surprised by how detailed the analysis was. It showed me exactly how to document my living situation to satisfy the primary residence requirements, plus gave me a complete breakdown of which expenses could go where for tax purposes. The best part was the clear explanation of how to handle the dual-use property. It turns out I can actually take both the qualified business income deduction for the farm portion AND get mortgage interest deductions for the residential part if I document everything properly. The tool generated a custom record-keeping template that makes tracking everything super easy. Definitely worth checking out if you're in this situation!

I had a nightmare dealing with the IRS on a similar property situation last year. Tried calling them about 16 times before finding https://claimyr.com which got me through to an actual IRS agent in less than 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c I had purchased raw land with a structure and couldn't get a straight answer from anyone about how to handle the taxes. The IRS agent I finally spoke to confirmed exactly what I needed to document to establish primary residence status and how to properly allocate the mortgage interest between personal and business use. Saved me thousands in potential penalties from doing it wrong.

I have to eat my words. I tried Claimyr yesterday out of desperation and got through to an IRS agent in about 15 minutes! After months of trying to reach someone about my property tax situation, I finally got clear answers. The agent confirmed that converting a structure on raw land to a primary residence is absolutely valid for tax purposes as long as you actually live there (they look for things like utility bills, driver's license address, etc.). They also explained exactly how to document the split between personal and business use when filing. The agent even sent me specific IRS publications about farm property that I didn't know existed. Worth every penny not to spend another 3 months trying to get through!

Just a heads up on something that bit me when I did this - pay attention to local zoning laws too, not just IRS rules. I converted a shed on my farm property to live in while developing the land, properly documented everything for tax purposes, but then got hit with fines from the county because the structure wasn't zoned for residential use. Had to get retroactive permits and do some expensive modifications.

Has anybody here dealt with claiming home office deductions when your primary residence is on farm property? I'm in a similar situation (built a cabin on my farm land) and use part of it exclusively for farm management. Do I claim that on Schedule F or as a home office deduction?

Another thing to consider - if you're getting an agricultural loan with reduced interest rates but then primarily using the property as a residence, some lenders consider that loan fraud. Make sure your lender knows your full intentions upfront. My neighbor got in serious trouble for this exact situation when the bank found out he was living on the "farm" property full-time and only had a small garden rather than a commercial farm operation.

One important thing to keep in mind is the timing of when you establish residence vs when you start claiming it as your primary residence for tax purposes. The IRS looks at where you actually live for the majority of the year, so if you're renovating for 3-4 months while still renting in town, you'll want to be careful about when you officially claim the cabin as your primary residence. I'd suggest keeping detailed records of when you actually move in full-time (utility hookups, mail forwarding, voter registration change, etc.) and use that date as your official residence change date for tax purposes. Don't try to claim it as primary residence while you're still primarily living in the apartment - that could create issues if audited. Also, since you mentioned this is raw land, make sure the cabin renovation meets local building codes for habitable structures. The IRS generally expects a primary residence to be a structure suitable for year-round occupancy with basic amenities (plumbing, electricity, heat). Document the improvements you make to ensure it meets these standards.

This is a great question and I can see you've gotten some solid advice already! Just wanted to add a few points from someone who went through a similar process last year. One thing I learned the hard way is to document EVERYTHING from day one. I created a simple spreadsheet tracking all expenses (renovation materials, utilities, loan payments, etc.) and categorized them as either "personal residence" or "farm business" related. This saved me tons of time at tax season and would be crucial if ever audited. Also, regarding the mortgage interest deduction - keep in mind that with the current standard deduction being so high ($13,850 for single filers in 2023), you might not benefit from itemizing unless you have other significant deductions. Run the numbers both ways to see what actually saves you more money. One last tip: consider consulting with a tax professional who specializes in agricultural properties before you finalize your setup. The upfront cost is usually worth it to make sure you're structuring everything optimally from the start, especially with the complexity of mixed-use property. Better to get it right initially than try to fix it later! Good luck with your farm venture - sounds like an exciting project!