Here are some tax-related benefits to homeownership you might not know.
I’m not a CPA or tax attorney, so before I begin, know that this advice is just a general guideline. Please consult with your CPA or tax attorney before you make any real estate transactions based on this advice.
That being said, there are two exclusions in the IRS code that allow you to avoid or defer paying taxes on the sale of real estate.
The first is the primary residence exemption. If you’ve lived in a home as your primary residence for two of the last five years and sell it, you can claim up to $250,000 in capital gains if you’re single or $500,000 if you’re married.
The second exemption is for investment properties. A 1031 exchange has a couple of rules. First, it has to be an investment property, and you have to have owned it for more than one year. If both conditions are met, you can exchange that property for another one of equal or greater value without paying capital gains taxes. The money from your sale goes to an intermediary, then you identify another property to purchase with those funds. You can then defer all your taxable liability on that money and use it to buy another, more expensive piece of real estate.
If you have any questions for me about this topic or real estate in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.
