Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Can 1031 exchange and homeowner exclusion be applied to one sale of home?
Suppose I bought a property for 1 mil five years ago. For the first two years Iived in it; for the last three I rented it out. Suppose it is worth 1.5 mil now and I sell it. Can I:
-- Use 1031 to buy another home for 750k
-- Receive 750k cash proceed, of which 250k is profit
-- Apply 250k homeowner exclusion to wipe out gain
Therefore I end uo with zero tax obligation for now.
a few problems .... you can only get the exclusion over a 5 year rolling period ... so you must sell that primary within a rolling 5 year period of which two years have to include it being your primary so it is a window ..
in order to get the exclusion at all you need to take it in that five year period or lose it ...
the exclusion does not carry over in to a non primary and you can't 1031 into a primary .
there are ways to make a 1031 exchange in to a primary but not a primary in to a 1031 exchange . you really need to sell the primary within 5 years and take the tax exclusion . then go buy an investment property . if you blow the 5 year window you blew the tax free exemption and it is all taxable . .
he wants to convert a primary to a rental then 1031 it eventually back in to a primary ....
he will lose the exclusion at the stroke of the 5th year .... bad idea . he neeeds to sell the primary within 5 years ... take the exclusion , then buy what he wants
"When you sell a personal residence and buy another one, the IRS will not let you do a 1031 exchange. You can, however, exclude a large portion of the gain from your taxes as that you have lived in for two of the past five years in the property and used it as your primary residence. A single person can exclude his first $250,000 in gains from taxes, and a married couple filing jointly can exclude $500,000. This means that you can sell the house and do whatever you want with the income without paying taxes on it."
he wants to convert a primary to a rental then 1031 it eventually back in to a primary ....
he will lose the exclusion at the stroke of the 5th year .... bad idea . he neeeds to sell the primary within 5 years ... take the exclusion , then buy what he wants
"When you sell a personal residence and buy another one, the IRS will not let you do a 1031 exchange. You can, however, exclude a large portion of the gain from your taxes as that you have lived in for two of the past five years in the property and used it as your primary residence. A single person can exclude his first $250,000 in gains from taxes, and a married couple filing jointly can exclude $500,000. This means that you can sell the house and do whatever you want with the income without paying taxes on it."
I understand the 2 out of 5 years. It is confusing how it works if the 2 years you live there are the first part and then you rent for 3 years thereafter. Is it still the same scenario or does the amount reduce that you can exclude? From what I understand, a 1031 is for an investment and not your private residence if I am correct. The OP wouldn't be able to take both deductions.
It is a rolling 5 year period .. you need to have it your primary for 2 of the 5 ... it matters the order ...so you can live in it 2 years and then rent and sell within the 5... after the five years you blew it....
But if it was a rental the first 3 and your primary 2 then the exclusion gets prorated over the total time you owned it vs your primary..
1031 is only for investment property in to investment property
When you sell a personal residence and buy another one, the IRS will not let you do a 1031 exchange. You can, however, exclude a large portion of the gain from your taxes as that you have lived in for two of the past five years in the property and used it as your primary residence.
I think this is what my "educated guess" was ... you can't double dip.
It is a rolling 5 year period .. you need to have it your primary for 2 of the 5 ... it matters the order ...so you can live in it 2 years and then rent and sell within the 5... after the five years you blew it....
But if it was a rental the first 3 and your primary 2 then the exclusion gets prorated over the total time you owned it vs your primary..
1031 is only for investment property in to investment property
Ah, OK. I new there was some difference. Thanks for clarifying
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
