Minimizing Capital Gains when Selling House Hacked Property

[Keith Goepfert]

Hey everyone, this is my first time posting in the community, so apologies in advanced if I violate any social norms here.

As I understand, selling a personal property allows for no capital gains taxes to be paid on the first 250k profit from the sale. If one is renting out a percent of their personal property, that same percent of the profits will be subject to capital gains tax at the time of sale. (let me know if I'm mistaken in this initial assumption).

My question is if there are any strategies to avoid realizing capital gains at the time of sale. For example, if I were to stop renting out a portion of the home, and live in the entire home for the year before sale, would that allow the entirety of the profits to fall under the 250k tax free limit?

I intend to consult a CPA soon, but I was hoping the community could shed light on my question in the mean time.

Thanks in advanced!

[Account Closed]

Quote from @Keith Goepfert:

Hey everyone, this is my first time posting in the community, so apologies in advanced if I violate any social norms here.

As I understand, selling a personal property allows for no capital gains taxes to be paid on the first 250k profit from the sale. If one is renting out a percent of their personal property, that same percent of the profits will be subject to capital gains tax at the time of sale. (let me know if I'm mistaken in this initial assumption).

My question is if there are any strategies to avoid realizing capital gains at the time of sale. For example, if I were to stop renting out a portion of the home, and live in the entire home for the year before sale, would that allow the entirety of the profits to fall under the 250k tax free limit?

I intend to consult a CPA soon, but I was hoping the community could shed light on my question in the mean time.

Thanks in advanced!

Yes, you are correct that selling a personal property allows for no capital gains taxes on the first $250,000 profit. If you were to stop renting out a portion of your home and live in the entire property for at least two out of the five years before the sale, you could potentially qualify for the full $250,000 tax-free limit. This is known as the "home sale exclusion" rule. By meeting the ownership and use requirements, you may be able to avoid realizing capital gains at the time of sale.