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You May be Risking the Loss of a Big Tax Benefit

Don't Lose The Capital Gains Tax Exclusion On Your Home Up North

Posted October 25, 2009

    For those who have already bought their retirement home or condo in Florida, it seems like an obvious move to change your legal residency to Florida to avoid paying income taxes on your earnings from up North. Many people do this even while maintaining their homes up North until they decide they are ready to move to Florida full-time.

    But beware, you may be setting yourself up for a "big" tax bill.

    The home seller's capital gains tax exclusion on the sale of your home up North is only applicable if that home was still your "principal residence" for at least 2 of the past 5 years before you sold it. Put simply, once you become a Florida resident, which is usually accomplished by doing things like registering to vote in Florida, registering your auto in Florida and then spending more than 6 months and a day in Florida each year, you only have 3 years to sell your home up North before the capital gains exemption on the sale of the home up North expires.

    Once you lose that capital gains exemption, you will be hit with the standard 15% federal capital gains tax on the gain on the sale of that home as well as any state taxes that may also be due on that gain.

    You will learn more about Capital Gains on Real Estate by reading this article.

    If you have questions or concerns about this, contact a knowledgeable realtor like Brian Ward, a competent Sarasota real estate agent, a real estate attorney or your accountant to assure that you don't give away a lot of money to your state and federal governments.