If you sell a multiple-unit property which includes your primary residence, the sale may qualify for a 1031 exchange, and you may be entitled to the $250,000 exclusion on capital gains. Just treat each portion of the sale as a different transaction.
For example, say you sold a duplex for a gain of $500,000 (assume both units are evenly valued). A $250,000 gain would be allocated to your rental unit, and $250,000 would be applied to the unit that you live in.
If you lived in your unit for two of the prior five years, you qualify to exclude up to $250,000 on the sale of your primary residence, and avoid paying any capital gains tax.
To avoid paying taxes on the rental unit portion, you could purchase a replacement investment property that cost $250,000 or more to qualify for a 1031 exchange.
Would you like to try some property management software with that 1031 exchange?
This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. Capital Gains Tax Planning | Principle Residence 1031 Exchange is brought to you by SimplifyEm Pay Rent Online and Property Management Software
|
Welcome back! What did you think of our Property Management Software?
Are you subscribed to our feed and receiving email updates? |
You might also want to read:
- Sell Property to Yourself | S Corp Capital Gains Tax Planning Selling property to an S-Corporation may be beneficial in some specific situations, like if you are trying to meet requirements for the two year rule ($250/500k exclusion), or if you are trying to take advantage......
- 1031 Exchange Tax Deferred | Avoid Capital Gains Taxes Forever You can potentially avoid paying taxes forever by continuing to exchange your properties. When you get down to your final property, just don’t sell it, and it won’t get taxed. Or you can just move......
- Capital Gains 1031 Exchange Tax Planning – Calculate Capital Gains, Minimize Taxable Boot! You can minimize gain and lower tax burdens by accounting for sale expenses and exchange fees. By minimizing cash received and maximizing cash spent, you can minimize your deferred gain so you can owe less......
- Tax Planning | Avoid Capital Gains Tax on Rental Property you Want to Sell To avoid paying capital gains tax on rental property you want to sell, consider moving into the property and making it your principle residence before selling it. Gain on the sale of your principal residence......
- Capital Gains Tax Deferred | 1031 Exchange Tax Planning When you sell rental property you will probably owe a 15% tax on the capital gain and a 25% tax on the depreciation recapture. You can defer the tax payments by doing a 1031 Exchange,......
{ 1 trackback }