For potential real estate investors the government, in the form of the IRS Tax Code, can provide a financial partnership towards the investment. Section 121 of the Code provides tax-free profit from sale of primary residence of 250K and 500K if married. You can also defer capital gains to a more suitable year when transitioning investment properties. These can be combined as a way to invest the profits tax-free. An example of this is to purchase a distressed property as an investment to rent. Eventually claim this as primary residence and then after specified period sell this property with the specified portion of profit tax free according to the provision.
- You can utilize tax benefits to enable you to invest in real estate.
- It is critical to familiarize yourself with the IRS codes and exemption information to take proper advantage of this benefit.
- You can use these benefits to turn vacation rentals into primary residences.
“Once you have demonstrated that your investment has been held for productive use in business or trade, its use can be changed. You must own the property for at least five years and live in it for at least two years.”