Tax Implications: Primary Residence Definition for Digital Nomad Homeowner under Section 121

I'm planning to sell my house soon and hoping to qualify for the Section 121 capital gains exclusion, but I'm not entirely sure if my situation makes me eligible. Looking for some advice! For context, Section 121 requires that the property be my primary residence for 2 out of the past 5 years. But I'm wondering what exactly qualifies as a "primary residence" in my case. I've owned my house for about 12 years now. It's the only property I own. All my official documentation is tied to this address - mail delivery, voter registration, tax return filings, etc. I also keep all my belongings there. The complication is that I began traveling internationally back in January 2021. I've been on the road continuously since then (so about 3+ years now). During this time, I've been staying in various hotels and short-term rentals, typically moving to a new city every couple weeks and never staying in one location for more than 3-4 weeks. **Would my house still count as my primary residence for tax purposes during 2021, 2022, and 2023?**

0 coins

19 comments

Manny Lark

•8M

Your situation is actually pretty common these days with remote work becoming so popular! The good news is that the IRS definition of "primary residence" is fairly flexible. For Section 121 purposes, your primary residence is generally considered to be the home you live in most of the time. However, when you're traveling continuously, the IRS looks at various factors to determine your "tax home." The factors you mentioned - where you're registered to vote, where you receive mail, where you file taxes from - all strongly suggest your house is still your primary residence. The fact that you haven't established another permanent residence is also important. Since you're moving every couple weeks and not staying anywhere else long-term, you haven't established a new primary residence elsewhere. Based on what you've shared, your house would likely still qualify as your primary residence for 2021-2023, even though you weren't physically present much. The key is that you maintained it as your only permanent home and kept all your official connections to that address.

0 coins

Manny Lark

•8M

Great questions! Physical occupancy is just one factor the IRS considers, not the only determining factor. The IRS recognizes temporary absences - even extended ones - can still count toward your period of ownership and use. This includes traveling, vacations, and seasonal living arrangements. Regarding renting, that's an important consideration. If you rented out your home while traveling, it could potentially affect your Section 121 eligibility. If you did rent it out, the portion of time it was rented might not count toward your "period of use" unless you also used it as your residence during that tax year. The rules get more complex if rental was involved.

0 coins

Khalid Howes

•8M

I went through something similar when selling my house after traveling for work! I was super confused about how to prove my primary residence status and worried about getting hit with a huge tax bill. I found this AI tool called taxr.ai (https://taxr.ai) that was incredibly helpful for my situation. I uploaded my property documents and travel history, and it analyzed everything to confirm my eligibility for the Section 121 exclusion. The tool specifically addressed the "digital nomad" scenario and provided documentation to support my position that my house remained my primary residence despite extended travel. What I really appreciated was how it explained the specific IRS precedents and rulings that applied to my situation. Gave me confidence when filing and saved me thousands in potential capital gains taxes!

0 coins

Khalid Howes

•8M

It works by analyzing your documents, travel records, and property information to assess your specific situation against tax codes and precedents. You upload relevant documents like property records, travel itineraries, utility bills, etc., and it evaluates everything against Section 121 requirements. For audit protection, that's what convinced me to use it. The tool creates an audit-ready tax position document that cites specific IRS precedents and regulations. I didn't get audited, but several users in their community forum mentioned that these documents helped them successfully navigate IRS questions about their primary residence status during audits.

0 coins

Naila Gordon

•8M

I was super skeptical about using an online tool for something as important as capital gains taxes, but I decided to try taxr.ai after struggling to get clear answers from three different tax professionals about my nomad situation. Honestly, it was way more helpful than I expected! The analysis was detailed and specific to my situation, not just generic advice. It identified factors I hadn't considered that strengthened my case for maintaining my primary residence status while traveling. What really convinced me was when I showed the report to my accountant, and she was impressed by how comprehensive it was. She said it addressed all the gray areas she was concerned about. I've now successfully claimed the Section 121 exclusion and saved about $95,000 in capital gains taxes that I would have otherwise had to pay!

0 coins

Cynthia Love

•8M

I had a similar situation but couldn't get anyone at the IRS to give me a straight answer about my eligibility. I called DOZENS of times and kept getting disconnected or waiting on hold forever. Super frustrating! I finally tried this service called Claimyr (https://claimyr.com) - they have this system that gets you to an actual IRS agent quickly instead of waiting on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was honestly shocked when I got connected to a real IRS agent in under 15 minutes! The agent was able to review my specific travel situation and confirmed that maintaining my voter registration, mail delivery, and tax filing address at my house was sufficient to consider it my primary residence despite extended travel. Got the exact clarification I needed instead of just guessing.

0 coins

Cynthia Love

•8M

It works by using an automated system that navigates the IRS phone tree and waits on hold for you. Once they get through to an agent, they call you and connect you directly. They basically do the waiting for you. The service is absolutely legitimate. I was skeptical too until I tried it. It's not about "skipping the line" - you're still in the same queue as everyone else. The difference is their system waits on hold instead of you having to do it yourself. They've been featured in major publications and have thousands of verified reviews. I wouldn't have gotten my primary residence question answered without it because I would have given up waiting again.

0 coins

Rosie Harper

•8M

I take back what I said about Claimyr being a scam. I decided to try it yesterday since I've been trying unsuccessfully to reach the IRS for weeks about a similar Section 121 question. It actually worked exactly as advertised. I got a call back about 40 minutes after signing up, and was connected directly to an IRS agent who was already ready to help with my question. No navigating phone trees, no waiting on hold. The agent confirmed that for nomads, maintaining your official ties to your property (voter registration, mailing address, tax filing address) does typically satisfy the primary residence requirement even during extended travel - as long as you don't establish a different permanent residence elsewhere. This was exactly the clarification I needed before selling my house!

0 coins

Elliott luviBorBatman

•8M

Don't overlook the "safe harbor" rule in Section 121! You mentioned you've owned the home for 10+ years. If you lived in it as your main home for at least 2 years during the first 10 years of ownership, you should qualify for at least partial exclusion ($250K for single filer, $500K for married filing jointly). What matters is that you satisfy the 2-out-of-5 years requirement BEFORE you started your nomadic lifestyle. Your continuous ownership still counts, and as others mentioned, temporary absences (even long ones) don't disqualify you as long as you maintain the home as your official residence.

0 coins

Elliott luviBorBatman

•8M

Good question. If you rented the property while traveling, it gets more complicated but doesn't automatically disqualify you. The IRS uses a facts-and-circumstances test. If you rented it out occasionally (like on Airbnb) when you weren't using it, that's generally not a problem. If you converted it to a full-time rental property, you'll need to calculate the portion of ownership that qualified as primary residence vs. rental property. You might still get a partial exclusion based on the percentage of time it was your primary residence during the 5-year period before sale.

0 coins

Kara Yoshida

•8M

I was audited on this exact issue last year. The key was providing documentation proving the house remained my "tax home." I submitted copies of my voter registration, driver's license, bank statements showing the address, utility bills in my name (even with minimal usage), and property tax statements. The IRS accepted my explanation that my travels were temporary absences and I had always intended to return to my home. I didn't lose my exclusion. Document everything!

0 coins