If you're thinking about selling your primary residence or rental property, keep reading.
I've been getting some questions about capital gains tax on the sale of your main home and rental property.
Here's the general rules:
Sale of primary residence
If you've lived in your home for at least 2 of the last 5 years and used the house as your primary residence, any gain, within limits, on the sale of your home is excluded from your income so tax free. Those limits are up to $250k for single and up to $500k married filing joint.
If you don't want to sell your home quite yet since rental demand is increasing and you see an opportunity for some rental income, you can rent out your primary for up to 3 years after moving out, and then if you decide to sell, you still qualify for the $250k or $500k exclusion.
BONUS TIP: if you decide to rent out your primary, that rental income is generally tax free because rental expenses and depreciation offset rental income.
Sale of rental property
If you're thinking about selling your rental, any gains are subject to capital gains rates. If you held the property for less than a year you're taxed at short term rates. If you held the property for longer than one year, you're taxed at more favorable long term rates.
If you're thinking about selling your rental, consider a 1031. Without getting into too much detail, you can swap your current rental for a new property valued at the same price or more and you won't have to pay taxes on that exchange. Those taxes are deferred until the exchanged property is sold.
Hope this helps. If you have questions or want my help looking into the numbers/details, let me know.