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Three Sixty At South Bay

360 Real Estate and Homes for Sale in Three Sixty at South Bay, of of the premier gated communities

How To Avoid Capital Gains Tax When Selling Your Home

Capital Gains Tax Exemption for Home Sellers**Taxes and paperwork

**Information below is for general knowledge. We are neither CPAs nor attorneys and cannot give legal or tax advice.  Information is reliable but not guaranteed and we highly recommend you consult with an attorney or CPA.

There are a lot of reasons to buy real estate…one of which involves the significan tax benefits you receive when your sell your primary home.

Homeowners who have owned their homes for at least two years are entitled to a capital gains tax exemption when they sell. For married couples that file jointly, the first $500,000 of gain is tax free. For single individuals, the exemption is $250,000. In either case, the property must be a primary residence that you occupied for 2 of the 5 years before selling.

The current capital gains exclusion for primary residences can be taken every two years. So conceivably you could buy ahome, experience two years of appreciation, sell the property, receive tax-free gain, buy another property and repea the sequence again and again.

The Taxpayer Relief Act of 1997 significantly changed the federal tax laws regarding the sale of a principal residence. Under the current law, you don’t need to invest in another home in order to defer capital gain liability, as was the case previously. Even if you sell your home and rent indefinitely, you’re entitled to take the $250,000 (individual) or $500,000 (married couples) capital gain tax exemption.

Contractors and renovation specialists are making good use of the current tax law. Some builders are choosing to occupy a home they’ve recently built rather than sell it new. After establishing the 2-year minimum residency requirement, they sell the property and are eligible for the $250,000 (individual) or $500,000 (married couples) capital gain tax exemption. Home buyers with fix-up expertise can use this strategy to help build wealth. First, buy a fixer and move into it. Fix it up and live there for at least two years. Then sell, take your tax-free gain and buy another fixer. But don’t even consider this approach unless you like moving a lot and you can live comfortably in a construction zone. You’re only entitled to cash in on tax-free capital gain on the sale of your primary residence. If you own income-producing property, you must pay tax on the gain when you sell unless you complete a 1031 tax-deferred exchange. A 1031 exchangeallows you to roll gain from one income-producing property into another income-producing property. You ultimately have to paytax on the gain, but a 1031 exchange permits you to defer capital gain tax payment in the future.

Federal tax laws are in a continuous state of flux, so be sure to consult a knowledgeable tax advisor before you buy or sell, particularly if income property is involved. State tax laws vary, so consult with an expert in your area.

Back to real estate tax information page

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**Please note that we have no official affiliation with Three Sixty at South Bay. Our site is designed to help provide real estate information on this and other communities.

The multiple listing data appearing on this website, or contained in reports produced therefrom, is owned and copyrighted by California Regional Multiple Listing Service, Inc. (“CRMLS”) and is protected by all applicable copyright laws. All listing data, including but not limited to square footage and lot size is believed to be accurate, but the listing Agent, listing Broker and CRMLS and its affiliates do not warrant or guarantee such accuracy. The viewer should independently verify the listed data prior to making any decisions based on such information by personal inspection and/or contacting a real estate professional.

The information being provided by CRMLS & CARETS is for the visitor’s personal, noncommercial use and may not be used for any purpose other than to identify prospective properties visitor may be interested in purchasing. The data contained herein is copyrighted by CARETS, CLAW, CRISNet MLS, i-Tech MLS, PSRMLS and/or VCRDS and is protected by all applicable copyright laws. Any dissemination of this information is in violation of copyright laws and is strictly prohibited.

Any property information referenced on this website comes from the Internet Data Exchange (IDX) program of CRISNet MLS and/or CARETS. All data, including all measurements and calculations of area, is obtained from various sources and has not been, and will not be, verified by broker or MLS. All information should be independently reviewed and verified for accuracy. Properties may or may not be listed by the office/agent presenting the information.

 

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Keith Kyle – Realtor – DRE#01712785