equity from the sale of a home into second property?

[Sarah King]

Greetings from Indiana.  We are about to list our primary residence for sale (house 1 for the sake of this conversation).  We are already in the process of closing on a new primary residence (house 2), and do not need the equity in house 1 to buy house 2.  HOWEVER we have been dying to get into the rental property business for a long time.  We would love to take the 30k in equity (mostly sweat equity) in House 1 and roll it into a rental.  We are new, and I have no idea how this works.  How much time would we have after we sell house 1 to roll this into a rental so we avoid capital gains?

Also, we do not want to keep house 1 to use as a rental because it is on 5 acres that take 2 hours to mow.  Plus, it is far from the new home, so a challenge from a newbie management prospective.  

Thanks! 

Sarah 

[Lauren Speidel]

@Sarah King If you have lived in house #1 for 24 out of 60 months you may qualify for the 121 primary residence exclusion. It allows you to exclude $250k (if single) and $500k (if married) of gain from your income. Therefore you may already be in a situation where the gains aren't taxable. Do you expect to see more than $250k/$500k gain on this property?