It´s a great deal for homeowners and really makes a lot more sense for the empty nesters who would rather scale down, than up.  As always, there are some limitations.  First of all, the property must have been occupied as your primary principal residence for two of the past five years. Secondly, the exemption is for the first $250,000 in profit if you are single and $500,000 if you are married.

It´s really an unbelievable tax break!  It has turned the average homeowner into a savvy investor.  Many homeowners have been buying homes and fixing them up while they live in it for two years, then selling to move onto another project without paying tax on the profit.

Those who bought another home and kept their original home as a rental should remember to consider selling before the property has become a rental for three or more years.  If that time is exceeded you could potentially loose $75,000.00 when you do eventually sell. 

Many landlords have discovered that it makes more sense to sell property A and avoid the tax, then invest in property C which they would eventually want to live in.  The sale of the first house (property A) would then start the two year clock on the current residence (property B).  After those two years have passed, the homeowner could sell (property B, move into the one that was purchased two years earlier (property C), thereby starting that clock.  The savings and possibilities are endless.

If you own San Diego real estate and missed your three year window and want to get rid of the original rental property and put that money into something easier to manage, there are a multitude of other ways I can help you accomplish that task with little or no tax implications. Call Dean, at (858) 414-4133  or email me  and I'll talk to you about your many different options. 

 The preceding article was written for informational purposes. Always consult a tax professional for issues regarding your particular situation.