I am moving back to the Bay Area where my wife and I own a home. She does not want to live in the house so we are trying to figure out a reasonable strategy for leveraging the house to buy a property that is in a more desirable location. I am hoping to gather some insight into this situation. I know that moving back into the house for two years will help us avoid the capital gains on the first $500K. I also know that doing a 1031 exchange will enable us to carry all of the proceeds from the sale as a deposit on a new property. We would eventually move into the second property and establish it as our primary residence (6-10 years from now).
Are there ways to look at these choices that go beyond the tax implications?
If the home is currently a rental you will only save a prorated percentage of the gains. (It’s a rental for 8 years, you move in to it for 2 years, you save 20% of the taxes on up to $500k in gains.)
if your wife doesn’t like the home do the 1031 to something she would like to live in in the future. If you plan to sell within a few year of making it your primary then don’t do the exchange until a couple years before you move in. (To make the tax free percentage higher.)
I am moving back to the Bay Area where my wife and I own a home. She does not want to live in the house so we are trying to figure out a reasonable strategy for leveraging the house to buy a property that is in a more desirable location. I am hoping to gather some insight into this situation. I know that moving back into the house for two years will help us avoid the capital gains on the first $500K. I also know that doing a 1031 exchange will enable us to carry all of the proceeds from the sale as a deposit on a new property. We would eventually move into the second property and establish it as our primary residence (6-10 years from now).
Are there ways to look at these choices that go beyond the tax implications?