Comment by amluto
14 hours ago
There used to be a “1034 exchange” in which you exchanged one personal residence for another. I don’t know why it was repealed.
14 hours ago
There used to be a “1034 exchange” in which you exchanged one personal residence for another. I don’t know why it was repealed.
The reusable $500k cap gains exclusion is a huge huge thing, bigger than some realize. (Though it is interesting that you can exclude gains from a house sale but not losses, but you if you own a rental you can claim losses but not exclude gains (though you can 1039).)
The reusable $500k exclusion is great in some markets. In the markets with serious housing cost problems, it’s nowhere near adequate. If you have a house that you’ve owned for 30 years in a market where the cheapest houses cost $3 million, and you want to downsize and move into a nice $2 million condo (sigh), and you live in a high-tax state like CA, you will owe long term capital gains tax on nearly $2.5 million, which comes out to around $750k. Real estate agent fees can easily eat up most of the remaining profit, and you probably end up with much higher HOA fees. And these expenses are basically a complete loss to your heirs. And, in CA, your property taxes increase from near zero to $20k/year.
So you probably don’t make the trade, and those spare bedrooms remain unavailable to anyone who would want them for the rest of your life.