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Updated over 6 years ago on . Most recent reply

Account Closed
  • Rental Property Investor
  • Austin, TX
176
Votes |
280
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Possible to avoid Capital Gains Tax by moving into property?

Account Closed
  • Rental Property Investor
  • Austin, TX
Posted

In regards to the IRS rule(s) that allow single/married individuals to realize a tax free gain on real property sales up to $250k/$500k so long as they live in the property for 2 of the past 5 years, is it possible for an investor to buy a house, rent it out to tenants for many years, turn around and move in to the house, live there for 2 years, and then sell it and avoid paying the capital gains on it? 

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Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
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Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
Replied

@Account Closed, 

What do you think ? If there is a hack like that, IRS already has a remedy.

There is something called non qualified use. 

So you have to prorate your gain between taxable and non taxable gain.

There’s is no non qualified use if you buy a house, live in it for 2 years, and rent it out for 3 years, in that order. 

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