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How to avoid capital gains tax on home sale?

What are my options for avoiding capital gains tax when I sell my home (this is currently a 25% primary residence and 75% rental home)? I have owned the home since 2009 and have rented a portion of the home most years since I purchased it (as shown in my taxes). It has been my primary residence for much of the time, but also 50-100% rental at times as well depending on whether I have been living in the home or renting another. [This is a single family home with 4 bedrooms, where each of my tenants have had a lease for their own room and share communal spaces like typical roommates.]

 

What are the best methods to avoid paying capital gains tax on the appreciation, and being able to either use those home sale funds myself or roll them into another property/investment? (I am specifically interested in relocating my resources out of California and into Vermont where I now own land.)

@CapitalGainsTax 

 

 

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1 Reply
Cindy4
Employee Tax Expert

How to avoid capital gains tax on home sale?

Hi @kwilcoxp !

 

The options to avoid the capital gain tax is to revert it to your 100% primary residence for 2 years, or do a Like-Kind Exchange.  The rules for the Like-Kind Exchange are strict.  Here is some information on it:

https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-ti...

https://www.irs.gov/pub/irs-news/fs-08-18.pdf

 

Also, when you do dispose of the property be sure to include everything possible in your basis calculation.  Here is a guide for that calculation.

 

Hope this helps!

Cindy

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope...

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