Mountain Homes and Land Legacies Real Estate Journal Series -
Dateline Asheville, NC
FYI ~Second Vacation Home 1031 Investors- IRS Closes Loophole- Second and Vacation Homes
Over morning tea and scones we happened on an article by Donna Fuscaldo who has written about personal finance for more than 10 years at the Wall Street Journal and Dow Jones Newswires.
As 1031 Specialists, we were aware of the tightening in tax exemptions and that. underscoring this change for our clients could be important in their decision-making process.
IRS closes tax loophole
" A popular strategy used by owners of vacation homes to avoid paying capital gains on a sale was to convert a vacation home into a primary residence. This was accomplished by living in the home for two years out of the previous five before selling.
By doing so a gain on the sale of up to $250,000 for single filers ($500,000 for married filing jointly) was [ italics ours] tax-free. The IRS hasn't done away with the cap-gains exclusion, but it is closing the loophole for vacation homes. Starting in 2009, you have to pay regular cap-gains taxes on the portion of the gain that's equivalent to the time you used the home as a vacation home after 2008."
**We had a good conversation about this article and agreed that when making a buying/selling/investment decision, it is important for us to remind our clients to keep in mind how often they will visit a property, and whether they even will allow renters. Always recommended: Consult with your tax attorney.
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