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Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 55715
Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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So as I understand, as a couple selling our home and making

Customer Question

So as I understand, as a couple selling our home and making a profit on our primary residence of less than 500,000, we do not have to pay capital gains taxes. We will be retiring soon and plan to sell our primary residence, which we have lived in for more than 5 years. We plan to move into our secondary cottage residence. At this time we do not have a mortgage on the cottage. We do plan on remodeling. So I'm trying to figure out if I need to have a mortgage on the cottage to reinvest the primary capital gains, or can we wait and do the remodeling with the money we make off the sale of our primary residence?
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Richard replied 2 years ago.
Good morning. My name is ***** ***** I look forward to helping you. Yes, that is correct. There is no requirement that you reinvest the proceeds. Rather, you simply have an exclusion of capital gains of up to $500,000 if married from the sale of your principal residence. This exclusion is allowed under Section 121 of the Internal Revenue Code. Specifically, the rule is as follows ( How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if the following is true:You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.You did not acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.You did not claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude. Thank you so much for allowing me to help you with your questions. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as OK, Good or Excellent (hopefully Good or Excellent). I thank you in advance for taking the time to provide me a positive rating!