Wednesday, July 25, 2007

Capital Gains

The capital gains exclusion for a married couple is $500,000 ($250,000 for a single person)if they have lived in the home two out of the last five years. In many expensive neighborhoods of the San Francisco Bay Area, this still leaves someone with a large capital gains bill. A solution is to convert the property into a rental for at least a year. Then, sell the property, take the exclusion and 1031 exchange the rest. This shelters all of the capital gains that remain and with the right planning, you can avoid the gains in the future too.

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