Real Estate Investor and the FREE Capital Gains Tax to $500K as couple
After listing his single story home in El Dorado Hills for $950,000 and used the exclusion of Free Capital gains to $500K, Tony decided to move in to his rental property that he bought 3 years ago for $255,000.
Meanwhile, with the proceeds on the sale of his home, we found him a huge 5 bedroom newer home in a gated community of Serrano that was vacant and bank owned for $350,000 during the recession in 2008.
Tony did the minor repair and repainted the interior. At the close of escrow, he easily rented the home for $2100/month to a young family of 3 kids because of the high school rating in the area. This year, Tony took the option of retiring at 56 years old as technical engineer with Intel in Folsom. He then spent more time playing golf, biking with friends on open trails and playing the stock market in early mornings.
This allowed him more time to travel with his wife, 3-4 months of the year with positive cash flow on his rental property and minimal mortgage payment compared to his big home he sold for $950,000! They indeed enjoyed this Retire in Style their own way.
After 4 years, Tony decided to sell the home he moved into and since he lived on it for 4 years, he again took the home owner Free Capital Gains on the home he bought for $255,000 sold to $379,000. He then moved to his 2nd rental home in the gated subdivision.
Tony and I worked with for over 13 years and we are still working together, this time looking for a fixer upper he can make as a project and fill up some free time.
Over the years, Tony was able to leverage the IRS Section 121 exclusion on Capital Gains Tax see (www.irs.gov/taxtopics/tc701.html) by properly timing the market buying and selling within his community. As his Realtor, listed and sold real estate finding the best deals and effectively negotiating for him. Meanwhile, he works with a local CPA who assisted him on leveraging the IRS tax rules.