How to handle tax payments from sale of a property
Question: I am considering selling my primary residence in Cape Coral and moving to a new house on Sanibel. I bought our home in 2010, so I expect I will have a significant profit. Is there anything I can do to eliminate or postpone paying tax on the sale?
Answer: Generally, we are required to report and pay tax on profits from any source. Thankfully, in the case of the sale of a primary residence, the IRS allows you to exclude up to $250,000 in gain upon the sale. If you are married and file taxes jointly, the exemption amount doubles to $500,000 gain. In most cases, you will not have to pay any income tax on the sale of a primary residence as a result.
Another consideration is the cap on your property taxes provided by “Save Our Homes.” You should be able to transfer a portion or all of your current cap savings to your new primary residence. There is excellent information regarding “Save Our Homes” portability at www.leepa.org.
If the property you are selling was an investment property, and you were buying a new investment property, a 1031 deferred like-kind exchange is an excellent way to defer income taxes on the gains on the sale. It is important to confirm the lawyer or business hired for a 1031 exchange is a qualified intermediary, and understands the Internal Revenue Code so you do not receive any surprises from the IRS.
I wish you and all of our neighbors a happy and safe Fourth of July. May the United States and the principles of liberty and freedom upon it was formed continue to endure.
Eric P. Feichthaler has lived in Cape Coral for 27 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 13 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.