Avoid Capital Gain On Home Sell
I recently inherited a home that I've been living in. My plan is to sale this home and purchase another home from the county aution and resale the home after repairs etc. is done.
I plan on doing this several times though out the year. I came probably avoid capital gain the first time but how can I do it on all the home buys and sells? :-?
Also, do you think the county aution is a good place to buy if title and comp's come back good? :-?
You can't avoid capital gains on flips unless you are using retirement money , IRA's or 401k.
If you buy & live in the property as your principle residence for the required 2 years you have a great loop hole there for capital gains (250k per person) (500k for husband & wife)
1031 exchange can be used if you hold it for ( my CPA recommends 13months min)
Buying from county auctions don't always mean you get a good deal. A deal is function of what it's worth & what you spend to buy it, fix it up, & resell it.
Michael,
Hello from south of the river.
As the other person noted, you are not going to be able to avoid the tax on this.
As that is the case you can be smart about it. Using IRA money is one way. Keeping careful track of the costs so that you know what to deduct from the profits is another.
Focus on making a profit and let the tax bill be the confirmation that you have been successful. Paying taxes and having a tax return that shows this is great when you want to borrow money. The lender will be able to verify the income and more open to making a loan.
It might turn out that given the above you decide to stay in one place as your perm home rather then moving and living in the places that are under work. This has a lot of advantages. Slightly more cost but if you are in and out quickly then the cost of having two places is not that much more. The hassle factor is much less and you can have without the construction site staring you in the face when you go to sleep.
One thing that you could do but it takes more cash is to hold the places for 12 months before completing the sale. This way you get better tax treatment. I seem to remember that there is a specific WA tax or rule that applies when you hold the place less then 12 months (different from short term gains vs. capital gains).
Check the rules on seller financing and how taxes are computed when you are receiving the profits over multiple years. That was a way in the past to spread out the gain. You can also restate prior year's tax returns. Something I have not done in a while so I am not current with that but it worked well in the past for me.
John
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