capital gains on real estate

Edwards Finance > Capital Gains

Q. We're renting our present home that we've lived in for 9 years starting April 1st. The rent covers the mortgage and the house will be paid off in 10 years. We live in Las Vegas where housing prices are climbing all the time. I've heard it's best to sell the home in 3 years to avoid capital gains and use the equity elsewhere. - Is it true that you have to live in the home for 2 of the last 5 years to avoid capital gains? - If that's true, does it make more sense to sell the home 3 years from now to avoid having to move back in, or continue to rent the home for 10 years or so before selling to retire? We do not want to move back into the home.

A. > We're renting our present home that we've lived in for 9 years starting > April 1st. The rent covers the mortgage and the house will be paid off in 10 > years. We live in Las Vegas where housing prices are climbing all the time. > I've heard it's best to sell the home in 3 years to avoid capital gains and > use the equity elsewhere. > - Is it true that you have to live in the home for 2 of the last 5 years to > avoid capital gains? You really don't want to avoid capital gains, trust me. If you don't want capital gains, you can give them to me. However, if you want to avoid capital gains **tax** (up to $500,000 tax free for couples filing jointly) yes you need to live in the house as your principal residence for 2 of the last 5 years. > - If that's true, does it make more sense to sell the home 3 years from now > to avoid having to move back in, or continue to rent the home for 10 years > or so before selling to retire? We do not want to move back into the home. Well who knows? Unless one can predict the future of the housing market in Las Vegas, no one can really give you good advice. In 10 years your house could've gain 200% and you'll pay 15% long term capital gains tax on it. Or the Vegas housing market could've collapsed and you'd indeed avoid capital gains.

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