Home Selling in Tampa>Question Details

Peter Kowalik, Home Seller in Tampa, FL

Can I avoid capital gains tax if I homestead a property bought specifically to flip within a couple months?

Asked by Peter Kowalik, Tampa, FL Sat Dec 6, 2008

What can I do other than keep it for 2yrs or 1031 Exchange, to avoid capital gains?

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A homestead tax exemption on cap gains only applies when you live in the home for 2 years out of the last five.

A 1031 and the above are the only ways to avoid the cap gains.

Keep good books on any rehab work and you can reduce your tax liability there.
0 votes Thank Flag Link Sun Dec 7, 2008
Yep... you need to talk to a CPA. Here is one intermediary that you can contact to learn about 1031: http://www.1031.us/Home/

In general, however, you need to think about it this way - you purchased TO flip... that is not about living somewhere, that is about a commercial enterprise - a business... i.e. income. THAT is why it is taxed as income... it is income! Makes sense, right? That's the spirit of the law, hopeful the letter of the law matches.
0 votes Thank Flag Link Sun Dec 7, 2008
If you are currently homesteading and living in the home as your principle residence and get transfered out of state, that would be the only other means of avoiding capital gains. You have capital gains? Awesome. In order to qualify for long term capital gains you have to hold it for a full year. Short term gains will be taxed at ordinary income levels. I agree, you must speak to a tax professional to get the best advise.
0 votes Thank Flag Link Sun Dec 7, 2008
Peter, unfortunately you will not be able to avoid that legally. Our advice is to contact an accountant and see if there is any other creative methods of limiting your tax liability with your current income structure.
Web Reference: http://www.miamism.com
0 votes Thank Flag Link Sat Dec 6, 2008
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