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Rising Star
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Rising Star
Hi
Can anybody tell mw what will be inhand
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I did it 3 years ago when selling a condo and while yes, the general rule of thumb is $500k of capita gain exemption, there are nuances - ie you rented the unit/home out prior selling it and took depreciation during those years of renting it, that money depreciated comes back to haunt you as taxable. Talk with an accountant/tax consultant for the most accurate information. A different story to a my builder does this with his own personal home every 2 years - ie builds a house, lives in it, takes the $500k exemption on it. I know others who have purchased multiple vacation homes that they’ve lived in during retirement for two years before selling and moving into the other one
Mentor
If you lived in it for a solid 2 years and sell within 5 years you’re good.
There are a lot of caveats to actually still take the exemption even under 2 years. For that def talk to an accountant.
I am currently lived in my home for over 3 yrs and will be moving out next month into a new home. Planning to rent it out for 3 yrs before the 5yrs tax exempt situation expires and sell it.
Mentor
If you are going to rent it it, you must depreciate the property and the gain exclusion does not prevent the recapture tax.
You could also 1031 exchange it and roll the equity into another property. Why would you suddenly stop leveraging that equity? Never sell it, capture rental income, hand it over to property management, leave it to your children. You can always borrow against it if needed tax free.
Mentor
This seems like a bad idea because then you are giving up forever the tax exclusion. If you sell you have $250k or $500k tax free gain. If you 1031 exchange it then if you ever sell you owe the tax. Better to sell, take the exclusion and then buy another property.
Mentor
I thought that there was some proration on this. If you have a rental property for 10 years and then live in it for 2 years can you exclude all the gains up to $500k (married) or do you have to prorate? Maybe the difference is where you live in it first or have it as a rental first??
You could sell and roll equity into another property raise your cost basis, but when you have a primary residence and get a loan for investment property it’s 25% down and 1% higher on interest. Lots of options here, but if it’s low interest I’m probably holding it. Moving gains to the stock market is going from leveraged gains to non-leveraged gains. It would grow much slower. You have access to the equity through loans if you need to access equity. The rolling capital gains exemption is more of a slow play flipper strategy. Buy a primary residence, fix it up, sell 2 years later capture equity tax free. You roll the equity into a new primary residence rinse and repeat. 1031 strategy is long term investing, flipping your house every two years is more of an upgrade strategy for primary residence. Both strategies are valid. You can also convert a 1031 exchange back to primary residence in 20 years live there for 2 years and use it as an offloading strategy for retirement.