Question:
“I’d like to sell my Clairemont condo and buy a little house in P.B. An agent said I could do a tax-deferred exchange and buy another home without paying any taxes. Is that correct?”
Answer:
A little knowledge can be dangerous.
The agent was trying to help, but applied rules for investment property (“tax-deferred exchange”) to your principal residence. That doesn’t work and will get you audited.
Fortunately, I’ve got some good news…
If you’ve owned and lived in your home for at least 2 of the past 5 years, you can exclude up to $250,000 of your gain ($500,000 for couples).
And there are exceptions to the 2-year rule. If you’ve had a major change in your job, health, finances, or family size, situation, or responsibilities, you may be eligible to sell before the 2 years and still defer much or all of your gain.
I’ve studied the IRS code, so feel free to call me to discuss your situation and I’ll give you my opinion. BUT I’m not a tax expert, so you should definitely also talk with your tax professional.
