When they sold it, they had paid off their mortgage and their capital gain was tax free because it was less than the $500,000 limit for a married couple. Ron and Laura then bought a motor home with some of the proceeds of the sale and banked the rest. After closing on their home, they drove out of the title company’s parking lot in their new RV and road off into the sunset.
If they had been renters, there would have been no $387,000 check and no tax deductions from Uncle Sam along the way to help them make their monthly mortgage payments. They simply would have had a nice stack of 276 receipts to show for twenty-three years of monthly payments.
Tax-deferred Exchanges For a first-time home buyer, a section on tax-deferred exchanges— whereby you can trade one real estate investment for another real estate investment and defer the capital gains taxes—may appear a little far out.
But this underutilized financial tool can make a big difference in the following situations. For example, suppose you: Want to keep your starter home for a rental when you move up to a larger house. Have rented part of your home and you want to sell, but some of the proceeds are subject to capital gains taxes.
Want to trade your single-family home for a duplex or fourplex without paying capital gains taxes. There’s a piece of land (or other real estate) you would like to trade your home for, but if the owner of that land sold, his capital gains tax would take a big cut of his proceeds.
Related posts:
- When You Sell: Capital Gains Taxes Part (3) The possibilities here are endless for creating win-win deals and...
- When You Sell: Capital Gains Taxes Part (6) The equity from one home was transferred to Georgia with...
- When You Sell: Capital Gains Taxes Many people live in a house for enough years to...
- When You Sell: Capital Gains Taxes Part (7) They wanted care-free time to travel and not worry about...
- When You Sell: Capital Gains Taxes Part (4) To find one, check with Realtors, title, or escrow companies...
