Thinking about Leaving California

[Chris Brown]

Hi all, This is my 1st post on BP! Im looking into selling our primary residence a Single Family home in San Diego CA. My goal is to sell our home and defer taxes using 1031 exchange or section 121 ( I'm not sure which is correct for my situation) take the proceeds to 

1. Buy a new primary residence in a new less expensive less dense market 

2. Purchase 1st MFR rental property

I'd like to accomplish all this while moving to a city where I can raise my young multi-ethnic family that's accustom to a Starbucks and Target on every corner. I'd love to hear thoughts on potential markets. Thanks!

[Dave Foster]

@Chris Brown Like @Dan H. and @Lee Ripma said, the 121 exemption is for your primary residence.  If you've lived in it for two years now it's eligible for you to get the first $500K of profit tax free just by selling it.  Actually a much better deal than the 1031 because it is tax free and no reinvestment requirement.

However, if you have more than $500K of gain in that house you may want to consider moving out and converting it to a rental for a year or so.  Use equity from the house to establish your new home but retain ownership.  

Then when you sell you'll still be eligible for the primary exemption as long as you've lived in for two of the last five years.  And you'll be able to defer the rest of the gain by doing a 1031 on the rest because the property would be currently used for investment.