Tom Ashworth

Real Estate Loopholes

real estatee loop holesThe principal residences capital gain exclusion for Real Estate can be availed only if one has owned and used the property for 2 out of the last 5 years. This means that the home has to be marketed, appropriately priced, sold and closed within six months.  If one has rented the house for 2.5 years after living in it for 2 years, as after that the next 5 years will start.

Sellers want to minimize taxes. A gain of $200,000 in a home will lead to $30,000 in long term capital gains taxes if one does not include the exemptions. The amount is significant and timing can make all the difference.

I advise people on how to save money on taxes; finance alternatives and help with homeownership investments. There was a huge loophole for personal residences it is also known as the 2 out of 5 year rule. Previously one could avail exclusion of $500,000 (married) or $250,000(single) if one had lived in his property for 2 out of the previous 5 years.

The provision was used by couples with multiple homes by moving individually into each home for 2 years before selling it and hence paying no tax.

The loophole was changed on 1st January, 2009 and after that the 2 out of 5 year rule was no longer applicable. However, there is a new loophole; you can take up to 2 years of temporary absences from your main residence if you meet certain requirements.

If you want to sell your house and save taxes when you need to be familiar with the tax loophole requirements that will allow you to avail for exclusion even when you have been away from the home. Real estate loopholes are still there; however, one has to look for them at the right places.

If you are interested in Real Estate in the Texas Hill Country, please feel free to contact Tom Ashworth (Smart Path Realtor) at (208)830-7991.

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