Help To Avoid Capital Gains?
My husband and I have owned and lived in our home for 10 months. We want to buy a bigger house down the street, but want to know if we can avoid capital gains of about $60,000. We're willing to rent out or sell our current property. Any advise please?
With your present plan, there is no way to avoid capital gains taxes, but there is a way to defer them for awhile.
Way #1. Turn your present house into a rental property. If you don't sell, no capital gains taxes. If you decide to sell your rental property at some future point in time, then use a 1031 exchange to replace your property with another like-kind investment property and defer capital gains.
Way #2. If you just have to have that house down the street, modify your plan a little. Buy that house down the street and make it your rental property. Live in your current primary residence for another 14 months to qualify for the capital gains exclusion. At the end of 14 months, you should be at the end of your tenant's lease as well -- don't renew the lease.
Sell your primary residence to qualify for the capital gains exclusion, then move into your "rental" property and establish it as your primary residence.[ Edited by DaveT on Date 02/09/2004 ]