Q:

Subject: Exchange Question

My wife and I own 2 homes within 55 miles of each other.

We consider one our primary, the second we are there all our free time.

With retirement coming in 8 years or less we wonder if we will be able to afford to keep both and if not is there a way one of us can change address, auto registration, voting etc. and have 2 primary residences with the hope that if we had to sell one or the other we could avoid capital gains ?

Thank you.

A:

This is the precise kind of thing that you need to be working with your own personal tax professional on.

Issues that you will need to consider when working up a strategy with your personal professional tax advisor should include the fact that no person is allowed to simultaneously have more than one primary personal residence.  You and your wife could each have one, but you would have to be ready to prove that you each lived full-time in separate homes.  Each house would also only be allowed a maximum of $250,000 tax free gain.

A more lucrative plan, depending on the size of the profits involved, would be to sell the home in which you have lived for at least two years, claim up to $500,000 of tax free profit, and then move into the second home, live there for two years, and sell it with up to $500,000 of tax free gain from its sale.

This is a overly simplistic description of the plan and will need to be fine tuned with your own personal professional tax advisor, especially in regard to any depreciation that may have been claimed on either home.

Good luck.

Kerry Kerstetter

Follow-Up:

 Thank you Kerry, I hope to get help soon as I am a "pre-retirement" person of 58 yrs old.

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 5/04/2006 01:33:00 PM Send this post: