Profile picture for rblakenyc

way around $500k exclusion?

I've had my home long enough (in pricy NY city) that the rise in value is about $500k.  Subsequent increases, if any, will be taxable as they exceed the $500k exclusion.  Any ideas, short of moving, on how to best address this?

 

If it matters, this is in a co-op.  I've considered a paper sale to another owner in the building and then selling each others units back - or, if it comes to it, actually moving within the building just to deal with this...  both seem rather extreme.

 

Oh, and while I am fortunate to have such a problem, please consider I live in a pretty average 1000 sq ft 2 bedroom apt and its not like I could move into something cheaper and pocket the "profit"...

 

Thanks

  • January 29 2008 - US
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Answers (5)

Profile picture for broker_GRI

Have you had a consultation w/a CPA?

That would be some of the best money you will ever spend

  • January 29 2008
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Consult with a CPA for your situation, but why are you worried about it?  It only will be a factor when and if you sell (I am assuming it is your primary residence and that you are married, lived in the house 2 out of the last five years)

You should be keeping reciepts for all your improvements too- again consult with the CPA about what improvements add to your basis. 

Another consideration what effect moving have on your property taxes?

Congratulations on your nest egg you are on your way to a happy retirement 

  • February 01 2008
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Address with happiness.

Over the years, you have earned $500K tax free money.

You will not have any taxes until/unless you sell the property.  Then the taxes will only be on the amount of gain over $500K assuming you are a married couple.

IRS guidelines allow a single person to pocket (tax) free $250K of gain on their primary residence that they have lived in for 2 or more of the past 5 years.  This amount is $500K for a married couple.

 

The more money you make in life, the more taxes you can pay.  This seems like a good thing to me.  Poor people say things like, "I don't want to make more money, then I will have to pay more taxes."  Give me a million and I will be happy to write the check to the IRS and state.

 

One easy option could be a 1031 tax free exchange.  You would need to convert your property into a investment property (rental?), and then eventually sell it.  Your proceeds would need to be rolled into a new investment property.  This could somewhat tie your hands on your money, however, and generally speaking, I think your best plan is enjoy your $500K tax free.

  • February 04 2008
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Profile picture for benjaminbenjamin

this is what i would advise also

 

One easy option could be a 1031 tax free exchange. You would need to convert your property into a investment property (rental?), and then eventually sell it. Your proceeds would need to be rolled into a new investment property. This could somewhat tie your hands on your money, however, and generally speaking, I think your best plan is enjoy your $500K tax free.

  • February 09 2008
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Perhaps sell the property to yourself using an S-Corp?

I'm not sure about your specifics, so you should check with a tax advisor.

  • February 28 2008
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