Primary residences can qualify for the federal capital gains exclusion (up to $250,000 for singles, $500,000 for married couples) when sold after two years of primary use, plus mortgage interest deductions while you own it. Investment properties allow depreciation deductions, write-offs for operating expenses and repairs, and the ability to defer gains through a 1031 exchange. Investment properties generally provide better annual tax advantages while you hold; primary residences offer a better exit outcome if you’ve built significant gains. Most portfolios benefit from both.
