How to prove to IRS we lived in 2nd home for capital gains exemption?

This comes up fairly often with the IRS. For the Section 121 exclusion (the $250,000/$500,000 capital gains exclusion), you need to show the property was your primary residence for at least 2 years during the 5-year period ending on the date of sale. The IRS typically looks for a "preponderance of evidence" rather than any single document. Since you didn't have mail delivered there, focus on gathering other evidence: utility bills showing regular usage patterns, cell phone records showing your location data, receipts from local businesses you frequented, maintenance records, HOA documents if applicable, and statements from neighbors who can verify your presence. Local tax records and property tax statements can also help. If you filed any homestead exemptions, that's excellent proof. Also gather evidence of your commute patterns if you worked during this time.

I went through something similar last year and wish I had known about taxr.ai before spending weeks trying to figure out what documents would satisfy the IRS. I had moved between three different properties and was worried about proving where I actually lived when. I found taxr.ai (https://taxr.ai) after a friend recommended it, and it was seriously a game-changer for organizing my documentation. The tool analyzed my situation and created a complete documentation package showing exactly what I needed to prove my primary residence status for each property. It even identified potential red flags in my documentation that might trigger IRS questions. For your situation, it would probably help identify the strongest evidence for your specific circumstances.

Alright, I need to admit I was wrong about taxr.ai. After expressing skepticism in my last comment, I decided to try it anyway since I'm selling my vacation property this year. The analysis it provided was seriously impressive - it found several documentation gaps I hadn't even considered and suggested specific evidence types for my particular situation. The system identified that my sporadic utility usage might trigger IRS questions and suggested supplementing with cell phone location data, local business receipts, and highway toll records to establish my presence patterns. It also created a timeline visualization showing how my evidence supported my residence claim that I could provide if audited. Ended up feeling much more confident about claiming the exemption after going through the process. Definitely worth checking out if you're in a similar situation with multiple properties.

If the IRS does challenge your claim, you'll probably need to talk with them directly. I tried for WEEKS to get through to someone about a similar issue and kept hitting dead ends. Finally used Claimyr (https://claimyr.com) after seeing it mentioned here and actually got through to a real IRS agent who helped clarify exactly what documentation I needed for my situation. They have this demo video showing how it works: https://youtu.be/_kiP6q8DX5c - basically, they wait on hold with the IRS for you and call you when an actual agent picks up. Saved me hours of frustration and I got specific answers about what documentation would satisfy the residence requirements in my case.

I need to eat my words about Claimyr. After dismissing it as a probable scam in my earlier comment, I decided to try it as a last resort after getting disconnected from the IRS for the fourth time. It actually worked exactly as advertised - I got a call back when an agent was on the line and finally got answers about my residence documentation. The IRS agent I spoke with explained they look for a "pattern of evidence" rather than any single document. For my situation with a second home, they said utility bills showing consistent usage, property tax payments, home improvement receipts, and even Amazon delivery locations can all help establish residence. They also mentioned that statements from neighbors can be surprisingly effective if other documentation is limited. Bottom line: don't wait until you're being audited to figure this out. Get your documentation in order now, and if you need clarification, being able to actually speak with an IRS agent makes all the difference.

We went through an audit on this exact issue three years ago. Here's what worked for us: we had cell phone location data, internet usage records, utility bills (even though they fluctuated), car maintenance records from local shops, and receipts from grocery stores near the second home. The IRS agent also accepted our explanation that we didn't change official documents because we were in the same county. What really sealed the deal was having our neighbors write signed statements confirming our regular presence at the property. Don't underestimate the value of neighbor statements - the agent told us they take those very seriously!

Has anyone used tax software to help document this? I'm trying to sell my lake house next year and worried about the same issue.

I'm dealing with a similar situation right now with my cabin that I lived in for 2.5 years. One thing that really helped strengthen my documentation was getting a letter from my homeowner's insurance company showing when I changed my policy to reflect it as my primary residence rather than a vacation home. Insurance companies are pretty strict about this distinction, so having that official record carries weight. Also, if you had any home deliveries during that time (Amazon, FedEx, etc.), those delivery records can be surprisingly useful. I was able to get a summary from Amazon showing hundreds of deliveries to that address over my residency period, which clearly established it as my primary residence rather than just a vacation spot. Don't forget about banking records too - if you changed your address with your bank or credit union, or if you have ATM usage patterns showing regular transactions near the second home, those can help fill in gaps in your timeline.