Jun 182019
Avoid Capital Gains tax on the sale of a home

Avoid capital gains tax on sale of home

Selling a house is a tiresome and expensive process, and when putting your home for sale, capital gains tax are inevitable. There are a few things you can do to help you avoid capital gains tax and make your experience less stressful.

It is a type of tax that applies to capital gains when a person sells an asset for more value than its original price. There are two types, the short-term capital gains that are generally higher and apply if the property is owned less than a year, and the long-term capital gains that apply once the property is owned more than a year and are at a reduced tax.

capital gains tax

Strategies to avoid capital gains on sale of home

Wait five years after purchasing the property to sell it

To be exempted from the tax you must have lived at the property as your primary residence for at least two years. Profit on the home would be taxed as capital gains if the home was not used as a primary residence for the required time.

Track all expenses made for the home

Track every cent spent in home improvement and presented it in the final cost with receipts and documents to help minimise profit and exempt you from the tax. Maintenance and cleaning costs are not included, but advertising and agents fees are.

Wait till you are experiencing losses

Selling during a time of low finances such as loss of a job or one partner quits work will place you in the 10% to 15 % bracket and exempt you from paying capital gains tax.

Limit rental of property

Renting out a property for more than three years will make it be classified as an investment and taxed as income. To avoid the risk, sell your home two years after moving out.

You can register on Amazon Kindle or on AUDIBLE for free (30 days) and read in-depth about avoiding this tax.

Selling your investment home and avoiding capital gains tax.

The main goal of investing is to make profits but selling an investment you run the risk of having huge taxes to pay. If you have an investment property, there are strategies to follow to exempt you from paying this tax.

Donate to charity

Donating part of the profits to charity will exempt you from paying capital gains tax and significantly reduce your taxes. Once you donate ask for a reduction in tax.

Exchange instead of selling

Exchanging similar assets will help you avoid capital gains tax until the time you sell the home. This occurs when you sell one property and buy another similar one within 180 days.

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Gift your home

Gifting your home to a family member who is in low tax bracket will help exempt you from this tax, and you can sell your investment without stress. If they decide to sell the property, it is charged at their rate which might be little to none.

Avoiding capital gains tax can be done by using these simple strategies and can help you save thousands of dollars. It is however recommended that you seek advice from a tax expert to make sure you have everything right.

Reader Comments

  1. I honestly didn’t know anything about capital gains before your post. This post gave me great info about it, and I can also share with friends and family who might be thinking about selling their home. Thanks for sharing your research.

  2. Very interesting! Many years ago when we sold our home we used one of these strategies to avoid capital gains. It is worth noting that if you first live in the home but then rent it out, you will once again be liable for capital tax gains as the home is now considered a rental property.

  3. Great strategies to avoid paying capital gains. I was curious about how much you need to donate to avoid paying capital gains or pay less.

  4. There certainly is a lot to consider when buying and selling a home. Having good documentation and receipts is always helpful.

  5. Very interesting stuff I had literally no idea about! Thanks for sharing. I’m not sure this applies in Canada but I do know that a lot of Canadians with winter homes in the states get dinged on this when they sell. Great to be aware of.

  6. So informative, I had no idea about these points. My aunt is planning to sell her house. Would send her this , would be so helpful for her.

  7. This is super helpful! My husband and I bought our current home with the understanding that we would sell it after Fixing some things up. I didn’t even know anything about this. So, thank you!

  8. We just invested in our third property and this is such sage advice. It’s unfortunate that it’s not always mentioned during the consult with a real estate agent. You really have to be your own advocate and research research research when you plan to sell.

  9. Some really great tips on avoiding capital gains tax! I honestly knew very little about it, but it´s always great to learn new things! I love the hammock from your shop now Amazon´s add!

  10. I don’t know whether I will be in this situation ever, but I know my parents are. And I think they would be into gifting the home to a lower income relative to get all of the benefits of not to have to pay capital gains that way.

  11. Great article. This is a topic I know I need to learn more about and you really helped me understand some good ways. Thank you.

  12. This is very informative. I always rely on my consultant though, there’s always a chance you may miss out something.

  13. This is quite helpful especially for those of us who have never sold a home. I’ve purchased one, but as we still live in it, I’ve never gone through the selling process.

    But from what I can tell, it is twice the headache of buying. >.

  14. Property management is no easy thing at all! Anyway, I love the idea about not selling a home you haven’t already lived in for five years. Such a hack! Anyway, I’ll completely agree on tracking all expenses made on improvement. At least, we have been doing so with our home.

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