- Aug 10, 2002
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Taxpayer relief act of 1997 provides a tax break for homeowners selling their primary residence. You have to live there for 2 years take advantage of it. Then when you sell it, you pocket any gain tax free (up to 250K for single filer, 500K for married couple) and avoid the typical capital gains tax that comes when profiting off of selling an asset such as this.
My fiance and I have renovation experience from a few different houses, tools and a team of contractors at our fingertips from various projects we've done. We were thinking this could be a great way to supplement our incomes, generate capital for more investments or even have one of us quit a job. We were thinking we could make this tax break into a core strategy of our own business, renovation is something we are reasonably comfortable doing anyway.
Scenario: buy a dumpy fixer upper with ample room to shuffle around in. Say a 4 bedroom and 2 bathroom for illustrative purposes. You have 2 years to get the house to a selling condition so you do one or two rooms at a time. Maybe do one bathroom while you use the other one and then switch. The kitchen will be the hardest part since not many people have a second kitchen to use. My fiance is a realtor so she is reasonably in tune with what current buyers want. Every improvement from this point forward would be geard towards attracting a future buyer. For instance, we dont really like stainless appliances but will put them in becuase the majority of buyers want that.
After 2 years, if you play your cards right, buy in the right neighborhood, dont over-improve the property etc... You get to keep all of that profit from the house sale. Say you make a big improvement that nets you a healthy profiit to the tune of 125K. Thats a tax free profit which you can repeat every 2 years, probably 3 years to be realistic.
Yes we will have to move every few years. Sure part of the house would be a construction zone but for a healthy tax free profit you get to keep for yourself, I could make this sacrafice. Anybody done this? Any glaring holes in this stragegy that I've missed? Can this tax break really be repeated every few years?
My fiance and I have renovation experience from a few different houses, tools and a team of contractors at our fingertips from various projects we've done. We were thinking this could be a great way to supplement our incomes, generate capital for more investments or even have one of us quit a job. We were thinking we could make this tax break into a core strategy of our own business, renovation is something we are reasonably comfortable doing anyway.
Scenario: buy a dumpy fixer upper with ample room to shuffle around in. Say a 4 bedroom and 2 bathroom for illustrative purposes. You have 2 years to get the house to a selling condition so you do one or two rooms at a time. Maybe do one bathroom while you use the other one and then switch. The kitchen will be the hardest part since not many people have a second kitchen to use. My fiance is a realtor so she is reasonably in tune with what current buyers want. Every improvement from this point forward would be geard towards attracting a future buyer. For instance, we dont really like stainless appliances but will put them in becuase the majority of buyers want that.
After 2 years, if you play your cards right, buy in the right neighborhood, dont over-improve the property etc... You get to keep all of that profit from the house sale. Say you make a big improvement that nets you a healthy profiit to the tune of 125K. Thats a tax free profit which you can repeat every 2 years, probably 3 years to be realistic.
Yes we will have to move every few years. Sure part of the house would be a construction zone but for a healthy tax free profit you get to keep for yourself, I could make this sacrafice. Anybody done this? Any glaring holes in this stragegy that I've missed? Can this tax break really be repeated every few years?
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