Tax Free Profits - A Better Example
There was a man in Arizona who had a easy plan. He bought a home, fixed it up while living in it, and sold it for a profit after two years - paying no taxes on the profit. It worked specially well because he was doing this from the late 90s until recent times, when hoe prices were going up at 15% or more per year in his area.
His plan worked so well, in fact, that he didn't need to get a job. He might buy a home in a neighborhood where homes were around $200,000, for example, but buy it as a fixer upper for $140,000. He spent maybe $15,000 bringing it up to the standards of the neighborhood, lived in it for two years while homes in the area appreciated 15% per year, and then sold it for $265,000. His $90,000 profit was tax free.
Even if you include his payments and taxes as an "expense" he had free housing and around $50,000 of income for the two years. As I recall, one home netted him more than $120,000 profit - tax free. As the two-year mark approached, he would start looking for the next home to live in and make a profit on. With no other job, he had a lot of time to find the best deals.
Talk to a tax specialist for more complicated scenarios, but there are undoubtedly other ways to take advantage of the new tax law. If you bought a home as your residence, for example, then moved out and rented it for some years, you may qualify for the exemption by moving back into it for two years before selling. On a $200,000 gain, this could mean paying $80,000 less in taxes for some investors.
Read full story @ http://www.buzzle.com/articles/tax-free-profits-with-real-estate.html
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