Here’s how to save on the taxes related to selling your home.
Our market has increased 25% over the last 12 months, which has given many homeowners the opportunity to capitalize on their homes’ equity by selling. However, the question of “What happens with my hefty tax bill?” is one we often get, and today we’re going to show you how to avoid that. There are two different ways you can get that bill lowered or eliminated:
The first is section 121, which concerns your primary residence. As a single taxpayer, you can defer up to $250,000 on the sale of your primary residence. If you’re married and filing jointly, you can defer up to $500,000.
The second tax break has to do with investment properties. When you sell one of those, you can use the 1031 tax-deferred exchange to take the proceeds and roll them into your next investment property. Then you can defer those capital gains taxes.
If you’re married, you can defer up to $500,000.
Both of these laws can be utilized through the revenue procedure 2005-14. If you have lived in the property as your primary residence for two out of the last five years and turn it into a rental before you sell, you can take advantage of both of these tax breaks.
Keep in mind that we’re licensed agents, but we’re not licensed tax professionals. If you have any tax-related questions, we recommend reaching out to a CPA or tax attorney.
If you have any other real estate-related questions, don’t hesitate to reach out via phone or email. We look forward to hearing from you soon.