Tax law for home sales

[dixieagle]

My husband and I, both 53, wish to sell our vacation home in early 2006(it has appreciated greatly in 11 years and we want out before another hurricane season!) and our primary home in 2007 (it has appreciated modestly in 21 years.) We plan to buy another home as soon as possible after the vacation home sale to take advantage of still-low mortgage rates and then put proceeds from the primary home sale into paying down the new home's mortgage. (For reasons of distance, logistics, etc., we cannot actually move full time into the new home until after our daughter's 2007 wedding.) Can anyone give me insight into the tax issues we will face? This is a very important move for us, and the most money we will have had to manage. Advice? Thanks.

[Mr. Knowitall]

You should be able to roll over the sale price of your old primary residence into your new primary residence, while taking advantage of the federal homestead exemption, but you may be stuck with capital gains on your vacation home. If the amounts of money involved are substantial, you should consult a CPA about possible means of minimizing or avoiding your tax exposure.

[dixieagle]

Thanks for the reply. Wouldn't you know it would be the vacation home that has about quadrupled in value!!! The more I investigate, the more I am afraid that there will be significant capital gains consequences, as the scenarios for deferring them (moving into the vacation home for two years and making it our primary home, "exchanging" it for another "like" property) are not feasible for us. CPA here we come!