First, as long as you have been living in the house for any 24 months of the past five years, you can exclude $500,000 of any capital gains that you might have from the sale to the trust...
And, as you have mentioned, the cash flow gain from not HAVING the mortgage obligation, will need to be adjusted for the tax benefit you have been receiving from the mortgage interest and property tax deduction
And of course, you need to have trust (no pun intended) in the trust's trustee that (1) you'll be secure in living there, (2) the trust's terms allow for this and won't disqualify it from reaching it's intended objectives - probably freezing of the asset value for the grantor and potential removal from their gross estate - and (3) that the trust has the ability (and the trustee has the willingness) to make this happen
But from an INCOME tax stand point for you, you are simply selling the house to a separate taxable entity, and again, as long as it's your personal residence you can exclude up to $500,000 of gain (for married filing jointly) from capital gains taxation
I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)
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Thank you so much, Lane. I was not aware of the $500,000 cap on capital gains... that is a huge relief.
The trustee and financial advisor is one in the same, he is the one who suggested paying off the mortgage. He said we can set it up to pay interest to the trust if need be. I believe we could then take the interest and, essentially, be paying myself back. So that amount of my trust would be in real estate instead of investment. We had planned to sell the home in another year or two.
Thanks again, Lane. You have really helped me with this.
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