Multifamily duplex question

4 Replies

How does Capital gains work if I purchase a duplex, live in one side as my primary residence and rent out other side. After 2 or three years I decide to sell duplex for say $60K more than I bought it for. Would I only be able to take half of the gains tax free or be able to take the full amount? I can't find a search button because I'm sure this has been discussed.

Thank you

Howdy @Harold Groetsema

The search button is in the upper right corner of the BP header.

What are you planning to do after you sell?  Buy another property?  If so make sure it has a higher value.  Then you can do a 1031 exchange and pay no Capital Gains Tax.  Otherwise, normal tax would apply.  

I am not a CPA or tax professional.  Seek professional help for accurate information.

CPA is your best bet but if youre staying in the real estate investment game you need to look at a 1031 exchange.  Just like the man said.  He's right on.

Thank you for your responses, and I found the search button. I must have been blind. Actually, I'm trying to downsize, getting tired of the cold weather and become a snowbird.

@Harold Groetsema After meeting the use requirement for the primary residence exclusion you can sell and take the portion of gain allocated to the side you live in tax free.  The other side is gain from an investment property so you can do a 1031 exchange on that portion and buy new investment real estate and defer the tax on the remaining gain

This is the really powerful thing about a house hack of a duplex or small MG.  You can avoid tax on all the gain- some tax free from sec 121 and some tax deferred through the 1031

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