Strategies To Avoid Capital Gains On Sale Of Home
Strategies To Avoid Capital Gains On Sale of Home
Wait five years after purchasing the property to sell it
In order to be considered exempt from the tax, you would need to have lived at the property as your primary residence for at least 2 years. If the property was not used as the primary residence for 2 years, any profit on the home would be taxed as capital gain.
Track all expenses made for the home
Keep a record of every penny spent on home improvement and present it in the final breakdown with receipts and all documents to help lower profit and exempt you from the tax. Maintenance and cleaning costs are not included, but advertising and agents are,
Wait until you are experiencing losses
Selling at a time of low finances is beneficial. Say you quit your job or your partner loses theirs; that will put you in the 10% – 15% bracket, which will exempt you from paying capital gains tax.
Limit rental of property
Try not to rent the property for more than three years. In doing so, you will ensure that the property won’t be classified as an investment and taxed as income. To lower risk, you’re your home two years after moving out.
Donate to charity
Donating part of the profits to charity will exempt you from paying capital gains tax and will greatly reduce your taxes. Be sure to ask for a reduction in tax once you donate.
Exchange instead of selling
Exchanging similar assets will help you avoid capital gains tax until the time you sell the home. This occurs when you sell one property and buy another similar one within 180 days.
Gift your home
Gifting your home to a family member who is in low tax bracket will help exempt you from capital gains tax, and you can sell your investment without stress. If they decide to sell the property, it is charged at their rate which might be little to none.