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Appealing Tax Law


Before we begin, please keep in mind that there are exceptions for every law so, no one should act upon this information without consulting a professional advisor about their specific situation.  Nonetheless, this law promises some interesting opportunities.

Let's get started: This law states that home owners who have owned and occupied their primary residence for at least two years of the five year period prior to the sale are not taxed on up to $250,000 of gain ($500,000 if they're married filing jointly).  This is not a one-time exclusion ... it can be done unlimited times, generally once every two years.  And, age doesn't matter.

That's fabulous!  The obvious benefit is that most people can move from home to home throughout their life time without ever paying tax on the profits.  But there are even greater, less obvious, benefits if you read between the lines of this tax law.

For example, consider a couple who owns a longtime primary residence and a vacation home.  Both homes have appreciated tremendously.  Under the new law, the couple could sell their primary residence and exclude profits up to $500,000, then move into their vacation home, live there for two years, sell it and exclude up to $500,000 again!

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Realtor, Licensed in Minnesota, Equal Housing Opportunity



Serving Cokato MN and surrounding area.

524 Kay Street SW
Hutchinson, MN 55350
It Gets Even Better
Or better yet, what if this couple owned those two homes plus several rental houses?  They could do as described in the previous paragraph, then they can move into one of their rental houses, live there for two years, then sell it and exclude the gain.  Then move to the next rental house and do it again.  Keep in mind that part of the gain resulting from prior depreciation deductions may not be eligible for the exclusion.

An even more efficient way for investors to take advantage of this tax law would be to package up all their rental properties and do a tax-free exchange into one big home on their favorite beach.  They use the beach house as a rental property for a few years, then convert it to their primary residence, live there for at least two years and exclude up to $500,000 of gain when they sell.  (Don't forget: part of the gain from depreciation may be taxable.)

That's powerful but wait, there's more:  The law even has some flexibility!  What if you don't meet the two-year requirement?  You still might be OK because the law allows you to prorate the $250,000 or $500,000 exclusion if you failed to meet the time period because of employment, health or other unforeseen circumstances.

Fixer Uppers Benefit Too

What if you buy homes, fix them up and sell them at a profit?  In the past you've had to pay tax on your profit.  But, under this law you could fix up the property, move into it for a couple years, then sell it and your profit is tax free (assuming it's less than the $250,000 or $500,000 limits)!

Everyone Wins!

So, sound the trumpets loud and clear.  The winds of tax law are blowing in favor of real estate.  The bottom line is, home owners across America can pull profits out of their homes tax free.  This helps sellers, this helps buyers, this helps everyone.  What a country!

Home Is Where Your Story Begins.

GRI, Graduate Realtor Institute CBR, Certified Buyer Representative ePRO, Internet Marketing Professional

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