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Tax Information
 At long last, the
IRS has made it even more attractive to buy and sell real estate.Two of the most significant
changes in the Taxpayer Relief Act of 1997 were the reduction in the long-term capital
gain tax rates and the more favorable treatment of the gain on the sale of your principal
residence.
Both of these changes will have very attractive ramifications on tax deferred exchanges.
- The reduction of long term capital gain rates from 28% to 20% means that if you
do not exchange you will be paying less in capital gains tax. The lower tax may
sway you from exchanging properties, prompt you to sell the property, or pay the
lower tax and reinvest the balance.
- The beneficial change in the "home sale rule" means that if you sell
a home you have lived in as your principal residence for two of the last five years
no tax is due if your gain is less than $250,000, or $500,000 if you are filing
a joint return.
In most cases, regardless of your age, there is no tax on the sale of a home that was
your principal residence for at least two of the past five years. It also means you
do not have to purchase a new home of equal or greater value.
For owners of investment real estate this means you can transfer your current investment
property for a property in another area that you are going to hold for investment or
business purposes. After you sell your principal residence tax free, you can move into
that investment property (or beach house), make it your new principal residence and
after two years also sell it tax free. An excellent way to save significant taxes and
enjoy excellent property appreciation.
We at Prudential Sun-Surf Realty can help you analyze any potential Emerald Isle area
investment property. We can prepare a "before and after"- tax cash flow designed
to assist you in estimating the first year benefits of a real estate investment. The
internal rate of return and other details can be found in a 6 page analysis with summary.
Our goal is to give you all the information we can to help you make an informed decision
on your real estate investment.
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