Selling my primary residence w $1M in equity

[Ivan Vasquez]

Question about selling my primary residence in San Jose that has about $1M in equity. We purchased it for $550k in 2012 and now it’s worth close to $1.5M and hoping it will go higher since The Bart station will open any min which is less than half a mile away. Google headquarters is being developed few miles away which will be ready next year. I want to sell next year but not sure what’s going to happen w the capitol gain on the profit. My wife and I want to sell to be able to get the equity out to buy another house. What are some things I need to be aware of? We currently have 2 other investment properties which we plan to rent for long term. Looking for advise?

[Dave Foster]

@Ivan Vasquez,  The limits under sec 121 would allow you to take only the first $500K in profit tax free.  The remainder would be taxed at capital gains rate - unless...  You moved out and converted it to an investment property for a year or so.  Then when you sell you would do a 1031 exchange buying another property because it is now investment property.  And you would also take $500K of profit out which would be tax free because you would still meet the residencey requirements of sec 121.

In other words, with a little patience you can take your $500K tax free and defer indefinitely the remaining $500K of profit.