As you likely know, the depreciation you claim with your home-office deduction is subject to a recapture tax when you sell your home.
How would you like to not pay the recapture tax? You may be able to do just that by following one easy step when it comes time to sell your current home and buy a replacement.
When you use this one easy step to sell your home in the right circumstances, you not only avoid the recapture tax but you also increase your tax basis in your replacement home. This gives you a double dip in tax benefits.
We make this work for you by following an IRS procedure that allows you to combine the tax-favored Section 1031 tax-deferred exchange and the Section 121 home-sale exclusion rules so that you can sell your home and
- avoid some or all the taxes on the sale of the personal part of your home,
- avoid and/or defer some or all the taxes on the sale of the office part of your home,
- avoid and/or defer some or all the taxes on the sale of the rental part of your home, and
- defer all the taxes on the depreciation recapture caused by the office or rental part of your home.
You may not currently be considering selling your home, but you may want to know how much this tax code combination could save you if you followed it today. If so, we can run the numbers for you.
Also, be sure to make a note to include us in any discussion once you decide to sell your home and before you pull any triggers.
