tax consequences of selling primary residence with larger

[Leah Lee]

I am currently seeking information on tax consequences of selling m primary residence. I know the $250/$500k rule after two years but I am trying to find out if you reinvest the gain that exceeds that into your next primary residence if you still must pay capital gains tax on the excess. Does anyone know the answer to this? Thanks!

[Dave Foster]

@Leah Lee, sorry but no.  The limits are what they are.  You're only opportunity to defer tax on the gain over the 121 limits is to move out of the property and convert it to rental for a bit.  As long as you then sell it while you can still document you have lived in it for 2 out of the previous 5 years.  If you do this then you would be eligible to both take the primary residence exclusion tax free.  And you could do a 1031 exchange on the remaining and purchase new investment property.

It takes some patience but if the tax bill is significant it can be worth the extra step.