Selling House - Need advice

[zero18]

What is the name of your state? NJ

I have 2 homes in NJ.
One I live in, the other I rent out.
Both homes are paid off.
I am selling both homes and moving to Florida.
The home I live in I bought 30 years ago for $40,000 - Selling for $250,000
The Rental home was left to me about 6 years ago. - Selling for $350,000
I am going to buy a home for myself and either purchase another rental or
use the money for a business.
What kind of tax am I going to be liable for?
is there a way to not owe any tax? or at least pay less?

 

[Snipes5]

Yes, there is. As for the house you live in, if you sell it for $290,000 or less, you won't be taxed on any of it. That's assuming of course, that you made no renovations or improvements to the house or property while you lived there. If you did, those amounts are added to your basis of $40,000, making it so that your selling price can be even higher and still not be taxable.

As for the rental, your basis is the value on the date of death (or alternate valuation date) of the person from whom you inherited. You will be taxed on the difference between the selling price and that value, plus you will have to "recapture" any depreciation that was taken on the house since you have had it as a rental.

To avoid tax on the Rental, do a 1031 exchange. These are very complicated, you will need a facilitator who has done many of them, in order to ensure that the transaction is done properly. Essentially what happens is you agree to exchange your property in New Jersey for property in Florida. This is all done with the assistance of the facilitator and the escrow company. Once you have elected to exchange properties, you have a specified amount of time to make the exchange.

If done correctly, you'll walk away with your principal residence sold, your rental exchanged for another, and not having paid a penny in Federal Taxes.

Snipes

 

[zero18]

Thanks for the help...
BTW are you for hire??

 

[Snipes5]

Nope, sorry.

 

[Ummonx]

where did you get the 290k number?, Primary residence are exempt from capital gains. Not flaming you, but curious.

 

[abezon]

$40k basis + 250k excludable gains = max net sales price for $0 tax liability.