Eligibility for Capital Gains Tax Exemption

[Ryan Tell]

I'm under contract for a new home purchase which will ultimately be my primary residence after selling my current home. I'm trying to figure out the best way to finance and avoid capital gains tax. I would like to use a VA loan for this purchase but I would be over the maximum entitlement since my current home loan is also a VA. My initial solution is to re-finance my current home into a conventional second home/investment property and to maintain primary residence there until I hit the two year mark of occupancy to mitigate capital gains tax. Concurrently, I would finance the new home with a VA loan and not officially move there until my current home is sold. Does anyone know if converting to this type of mortgage (second home or investment property) on my current home would make me ineligible for the IRS exemption on the capital gains tax?

[Dave G.]

Well, I'm not a tax expert, but at the most basic level, I am only aware of the IRS occupancy rule. Which is what residence do you spend the most time at. There are some additional qualifiers such as where are you registered to vote and where are your cars registered, etc. But I know of nothing regarding the financing used for purchase being a contributing factor to the definition of "primary residence"