How to avoid Capital gains tax?

Staten Island, NY · Member since 2015 · 265 posts · 59 votes

Hello all, basically I am putting my primary home on the market after I recently got it appraised and I am looking at getting a large profit. I currently have lived in this home for about 14 months and I used a VA Loan. Looking to sell this and get a multi-family using the VA Loan again or perhaps even buy another SFH home and flip it like the one I currently am in. I have a few options I can do. Anyway how do I avoid capital gains tax?

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

@Erick Hernandez, don't bet against @Wayne Brooks :). The 1031 exchange is not available for your primary residence. It is only for investment property that you have purchased with the intent of holding for productive use in business trade or investment.

The shelter for your primary residence is found in sec. 121. If you have lived in it for 2 out of the last 5 years you can take the first $250K ($500K if married) in profit tax free.

As far as options for @Eric DeVito, there is a proration available for your primary residence if you have to move for medical or job related reasons. Your accountant can let you know if your circumstances would fit. Other than that stroke the check for taxes, look at what's left in your bank account - and smile! Once you're started on the path with investment property you'll be able to defer the tax the rest of your life with the 1031.

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