How to avoid the Capital Gains Tax

[Sean Curl]

I bought my home for 251k in California and sold it for 458k 1.5yrs later. I understand that I'm going to have to pay capital gains tax. How can I avoid paying so much of that tax? Buy a new home?

[John Underwood]

Take your money and flee to Mexico is the only way I can think of to avoid the tax you owe. Buying another house after the fact won't help.

[Theresa Harris]

You're paying taxes because you made money.  You made $200K in 1.5 years, that is pretty good.

[Eliott Elias]

You avoid it via a 1031 exchange, but that should have been executed before you close. If your property was a homestead you can get a tax break up to 250k if you're single and 500k if you're married 

[Joe Martella]

Quote from @Eliott Elias:

You avoid it via a 1031 exchange, but that should have been executed before you close. If your property was a homestead you can get a tax break up to 250k if you're single and 500k if you're married 

I believe you have had to live in the house for the last 2 of 5 years.  So if he sold in 1.5 years then the homestead doesn’t count.  

If you can show the repairs that you did to the property that may help. 

[Steve Vaughan]

Tax efficiency just tales a little planning. 

Living in your house for 6 more months would waive the gain entirely.

The good news is l-t cap gains rates are favorable and you won't have depreciation to recapture. 

[Matt Devincenzo]

Unfortunately you generally have two separate ways to defer/exclude capital gains from RE, and you can't take advantage of either. 1) for a primary home you can exclude 250K single 500K married capital gains if you live in the home for a min of 2 years within the last 5. The other would be to 1031 an investment property gain into a new investment property. 

The only remaining options to consider are if you could qualify for a partial 121 exclusion based on selling for a job transfer etc, or looking into investing into a qualified opportunity zone project. I haven't heard much about O-zone projects recently...so you may need to research a bit more to see if/how they may be useful.

[Andrew C.]

Quote from @Steve Vaughan:

Tax efficiency just tales a little planning. 

Living in your house for 6 more months would waive the gain entirely.

The good news is l-t cap gains rates are favorable and you won't have depreciation to recapture. 

 not in CA. CA taxes (even LT) cap gains as regular income. You get to exclude (I think it's 30%??) of the amount for the state portion - check the CA regs. But otherwise, I expect you're paying 20% Fed CapGains on this + like 11% CA. and also your state's CapGains tax if you live out of state. wheee. 

[Tony Kim]

Quote from @Andrew C.:

Quote from @Steve Vaughan:

Tax efficiency just tales a little planning. 

Living in your house for 6 more months would waive the gain entirely.

The good news is l-t cap gains rates are favorable and you won't have depreciation to recapture. 

 not in CA. CA taxes (even LT) cap gains as regular income. You get to exclude (I think it's 30%??) of the amount for the state portion - check the CA regs. But otherwise, I expect you're paying 20% Fed CapGains on this + like 11% CA. and also your state's CapGains tax if you live out of state. wheee. 

 It takes a 30 second Google search to confirm that the above is not correct. But I didn't really need to search because I've used the 121 exclusion several times here in CA.

[Eddie L.]

***Not a CPA and no filing tax return experience for others***

Barring any changes to legislation, you can invest in a qualified opportunity fund to defer the gain.

https://www.irs.gov/credits-de...

[Basit Siddiqi]

Can the gain be excluded / deferred?
Is the gain passive - Do you have passive losses?
Do you have capital loss carryforwards

Best of luck!