Hello,
I know that when one sells one's home after living for 2 years in the last 5 years prior to sale, one could deduct a gain to the maximum of 500K. If gain is more than 500K, the excess is taxable in the year of sale. Given this, consider and clarify.
Home sale price is 2million.
Cost of home is 1Millon.
So gain in 1Million.
Then 500K is tax free.
But 500K gets whacked with Tax.
Suppose if one can take HELLOC and take out loan out of HELLOC or
Do a cash-out refi just prior to sale ..
And thus pay off the 'taken out cash' with sale proceeds to net it against the taxable portion of the gain .. thus reduce it or even eliminate and avoid taxes. I read somewhere that the cash-out is not considered income and not taxable. By the same token, paying it off appears to reduce the taxable gain as well.
Is that legal to do so?
regards
