1031 Exchange Specialists,

A National Qualified Intermediary

Inc.

[1031 ESI]

 

Corporate Headquarters:
1155 Asbury Avenue
Ocean City
New Jersey 08226

Ocean City, NJ: 609-398-1031

Naples, FL: 877-513-1031

   Fax: 609-398-0500

Web: www.1031esi.com
Email: info@1031esi.com
Independently Owned and Operated
 
SERVICING ALL 50 STATES!
 
Your Tax Savings is Our Business! 



THE "GREAT" REAL ESTATE TAX BREAK

Combining a Like Kind Exchange

and the Principal Residence Exclusion

 


In the Taxpayer Relief Act of 1997, Congress passed a major tax break for everyone who owns their home. When the like-kind exchange rules and the homeowner exclusion rules are both used, taxpayers can achieve a very significant tax break.

Q.    What is the principal residence exclusion rule?

 

A.    Married couples filing jointly can exclude up to $500,000 of gain when they sell their principal residence.  Single taxpayers can exclude up to $250,000 of their gain.  To qualify for the exclusion, you must have owned and used the home as a principal residence for an aggregate of two years during the five years preceding the sale.

 

Q.    Can I exchange my current investment property for another investment property, then convert the investment property to my new principal residence?

 

A.    Yes.  This approach will maximize your tax savings.  When you transfer your current investment property as part of a like kind exchange , you defer the tax on the gain.  When you sell your current principal residence, you exclude up to $500,000 of gain.  Then after you convert your investment property to your new principal residence, you become eligible once again after two years of occupancy and five years of ownership for an exclusion of gain.  Properties converted from investment or vacation use to a principal residence after December 1, 2008 may not receive a full exclusion of gain.

 

Q.    When can I convert my investment property to personal use?

 

A.    You can convert an investment property to personal use at any time you desire without paying tax at that time. If you just acquired the property doing a like kind exchange, you must hold and utilize the property as an investment property for two years to meet the IRS guidelines.