Massachusetts tax laws re: House Hacking
Can someone, familiar with Massachusetts tax codes, answer a question for me please? I have heard that if you buy a multi and live in one of the units, or for that matter any property you plan to live in, that you must reside in the home for two years to avoid paying some large tax. Is this true?
I have read in the house hacking section that many people buy a multi, live in one apartment for one year and then repeat. Are they getting socked with some tax for doing that or is there a loophole I have missed?
Thanks ahead of time for your replies
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@Robert Andrade Disclaimer: I am not a tax professional! But since you mentioned the 2 years I think you are referring to the Capital Gains Exclusion. This only comes into play when you sell the property. If you lived in the property and claimed it as your primary residence for 2 out of 5 years you can exclude up to $250k of profit if filing single and $500k if filing jointly and selling the home at a gain. You do not have this same exclusion for an investment property when you sell. You either pay taxes on the gain or roll it into a 1031 exchange as Rob stated, and that is an entirely different beast altogether! Basically you dont get popped with the tax if you immediately reinvest it in another investment property.