It's a season of many "firsts" for me. First time poster and first time seller. I'm grateful in advance for any advice/guidance, etc. I'll explain my current situation and follow that up with three questions.
Situation: Currently own a condo and selling for the first time in Seattle, WA. This is been my primary residence more than 2 out of the last 5 years. I'm married and file taxes jointly with my wife. Our profit will not exceed $500k. Goal is to buy a single family home.
Question 1: Must I do anything to avoid paying taxes if my profits do not exceed $500k or do I just sell and go on my merry way?
Question 2: Must I use all of the profit toward a new home or can I save a portion for rehab or invest it in another project?
Question 3: Does a 1031 Exchange apply to my situation?
@Jordan Greek so I'll add to the "firsts" and be the first to respond to you.
1. Go your merry way after you verify dates of residency and amounts of gain. Just let your accountant know so he can reconcile the 1099 you'll get from the title company.
2. Spend it on anything. Go to the dog track if you want. Maybe pay down some other debt????
3. Nope. 1031 is only for investment real estate and it lets you sell investment real estate and buy investment real estate and defer the tax. Your primary residence exclusion is tax free (see #2).
And remember you can do this once every two years. So as long as you have a willing spouse it's a great way to generate tax free dollars from appreciation.
@Dave Foster You're the man! Thanks for the quick and insightful reply.
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