If you are not already aware, there are some exemptions available to your capital gains period if you come up against unforeseeable circumstances that require you to move. The Federal Tax Code provides ways a property owner can dispose of, exchange or sell an appreciated property and receive tax benefits. Some alternatives are described below.
IRC Section 121 enables a homeowner to exclude capital gain taxes (up to $250,000 if filing as a single, and $500,000 if married and filing jointly) if living in your principal residence as a primary residence for two of the last five years. Partial exemption is also available in certain unforeseen circumstances such as a move of more than 50 miles in employment, health or medical reasons, divorce or death. This can even include having multiple births which require a larger home! So if you were thinking of selling, and you may have one of these situations, contact your tax attorney or accountant to review your capital gains issues. If your home has appreciated little in the time that you have had it, your tax consequences may be very small, and your ultimate benefit may be very big by moving now. If you own units and live in one of them, you are still entitled to any applicalbe exemptions on your owner occupied portion.
Revenue Procedure 2004-51 also allows a property owner to convert a primary residence to a rental property, and later take advantage of both capital gain tax exclusion under §121 and tax deferral under §1031 by exchanging into a replacement property held for investment or for use in trade or business.
Long Beach, taxes
courtesy of Apiex.com
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