Are you looking to downsize your principal residence now that the kids are out of school and the mortgage is paid off? You might sell the place, collect a bundle of tax-free cash under the home sale exclusion and move temporarily to a second home you’ve been using as a vacation home.
Strategy: Keep the “second home” as your main home for at least two years. Then you can double up by claiming the home sale exclusion again.
If you have owned and used a home as your principal residence for at least two of the five previous years, you can generally elect to exclude from tax the first $250,000 of gain on a sale for single filers and $500,000 for joint filers. It isn’t a one-time deal. You can pocket the maximum exclusion multiple times if you qualify.
This tax break also covers the sale of a home that was a vacation home and converted into a principal residence. However, for conversions occurring after 2008, the portion of gain a...(register to read more)