How to avoid or defer paying capital- gains taxes on the sale of your primary residence. See prior posts (Avoiding Capital Gains on Your Primary Residence, A 1031-121 Example)
1031-721 Conditions to Qualify
• You must have lived in your house for at least two of the past five years.
• The profit on the sale of your home must be greater than the capital- gains tax exclusion -- $500,000 for married joint filers.
• You must have established a home office or converted your home into a rental property, and you must purchase a similar property when you sell.
How to avoid or defer paying capital- gains taxes on the sale of your primary residence.
-- Set up a home office or rent out your property. To qualify for a federal home-office tax deduction, you must use part of the home exclusively and regularly as your principal place of business, meaning for administrative or management activities; as a place where the owner meets or deals with
patients, clients or customers in the normal course of trade or business; or for rental use.
-- Make sure you file Form 8829 to claim the home-office deduction, or the IRS may not recognize the office portion of your home.
-- When you are ready to sell, you can claim the standard capital-gains tax exclusion, up to certain limits: $250,000 (for most singles) and $500,000 (for joint filers). To qualify for the full exclusion, you must have lived in the home and used it as your primary residence for at least two of the five years
prior to the sale. If your gains exceed those limits due to the commercial portion, you can defer taxes on those gains by buying another commercial property, if that property is worth as much or more than the value of the commercial portion of the house you are selling.
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