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Under
a tax law enacted in 1997, if your house was your principal residence
for two of the last five years, you can exclude as much as $250,000 in
gain ($500,000 on a joint return) when you sell it.
You don't have to reinvest the money, and you can claim the exclusion
every two years. (If you've got $500,000 in gain every two years, I
want to meet your real estate agent and go shopping!) [8
types of income the IRS can't touch]
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There are plenty other tax breaks in real estate, the government essentially subsidizes it. That's why my main investments are all rentals, as Bill Gates is famous for saying, the best way to get rich is a good working knowledge of the tax code. I'm not planning to sell any of my rentals, so the current sub-prime crisis (a pickle the banks themselves are 110% responsible for) is meaningless to me. It would actually be a good thing if my wife and I hadn't had two babies is the last 16 months, we might have some money in the bank to grab a few bargains.
ReplyDeleteDon't be too confident about your rental properties. All across FL, rents are actually coming down. My newest lease is 6% lower than last year's, which was stayed the same as the year before. So much for the automatic escalator in rents....
ReplyDeleteThanks for the warning, but I'm in a different sort of market from Florida. Also, I actually line up my tenants before I make a purchase, and I've never raised the rent on an existing tenant (not yet anyway). I get virtually zero turnover that way. And I would never depend on escalation to make the fundamentals work out, that's a little risky.
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