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How to avoid capital gains tax on real estate?
Hi, How do I avoid paying capital gains tax on real estate? We're planning to move, rent for a bit to see what neighborhood is best for us, and then buy a home. It might take a year or so before we buy our next home. But we don't want to pay capital gains tax. Is there a way to avoid this?
Asked By Carol | Glenview, IL | 434 views | Finance Legal Info | 1 year ago
Answer(4)
Gloria Mitchell
Wilkinson Triad Realty
1. Use primary residence exemption: The primary residence exemption can be used to exempt any gains realized on the sale of a primary residence from capital gains taxes. In order to qualify, the home must have been the primary residence of the homeowner for at least two of the past five years.
2. Defer taxes with a 1031 exchange: Section 1031 of the Internal Revenue Code (IRC) allows investors to defer the payment of capital gains taxes when they reinvest their gains into a “like-kind” investment, such as another real estate property.
3. Defer taxes with a charitable donations: A charitable donation can be made in exchange for a tax break, allowing homeowners to reduce their capital gains taxes by donating a portion of their gains to a qualifying charity.
4. Use cost-basis adjustments: The cost-basis adjustment is a procedure in which the owner of an investment property can adjust the price paid for a property to reduce the owner’s taxable gain. This can be done by rolling over capital gains from the sale of an investment property into a comparable, lower-priced investment property.
5. Take advantage of available tax credits: Some states offer capital gains tax credits for specific improvements made to a property before it is sold. These credits can help reduce the taxes owed in the event of a gain.
- 1 year ago
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Jim Rossi
RE/MAX 2000
Contact a CPA or financial adviser to discuss your situation with them in detail. Capital gains may not even apply.
- 1 year ago
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Brinda Griffin
Griffin Realty Llc
If the home was your primary residence for the last 3 of 5 years, more than likely you may not pay capital gains tax. There are limitations on how much equity you receive etc. Definitely consult a local reliable tax accountant.
Good Luck!
- 1 year ago
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Joe Bourland
EXP Realty
100% agree with Jim Rossi.....contact a trusted CPA before doing anything.
- 1 year ago
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