Buy & Hold... But with a tax consequence for selling within 9 years?

Buy & Hold... But with a tax consequence for selling within 9 years?

CT · Member since 2014 · 54 posts · 18 votes

Hey, all! I wasn't really sure what to call this post, so forgive me my scatter-brained topic! 

I'm looking into a few different options of ways to purchase a home once I get around to buying my first one late next year, and one of the more attractive opportunities is a state program for teachers who are teaching in-demand subjects in transitional/priority (read: poor) districts, which is what I believe I'll be doing in a year's time.

There are a lot of incentives, but the only big drawback seems to be that in "some cases" (super vague, can't dig up too much more) if you sell the home within 9 years and make capital gains, you can be charged what sounds to be a pretty hefty federal tax. 

My strategy at this point seems to be going toward buying & holding MFHs, so in theory this wouldn't be too problematic... it just worries me by not having a clear exit strategy should I need one; that I'd be cornered into holding onto a home that maybe becomes a burden/nuisance for fear of getting slammed with some unexpected loss come tax season.

Has anyone else here had a similar experience? Is this something not worth looking into when weighing risks?

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  • Peoria, IL · Member since 2011 · 365 posts · 182 votes
    11y

    Remember that taxes are on gains. 

    Even if you do have to pay a tax (which I don't think you will), it means you made alot more than the tax bill. 

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y

    If the state program requires that the property you purchase be located in the poor school district, is there a strong demand by occupants who want to live in that poor school district?  I have found that many of my tenant prospects were looking to escape a poor school district, preferring to live in the neighborhood with a better school district. 

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