Are you thinking of adding real estate to your portfolio? If you are, please consider the acquisition of a property that could be a principal residence at a later time for you and your spouse. If you have always wanted to live at the beach or in the mountains, this strategy allows you to get a second home or rental into your portfolio while keeping the option open for making it a principal residence at a later date. Why is this important? Please read on to find the answer.

If we create a real estate piece to our portfolio that allow us to claim property as our principal residence at some point, there is the potential to save on income taxes. Suppose that one purchases a property as a rental with the idea that it would make an ideal principal residence at some later date. Assuming that they currently own a principal residence. they will be able to sell their current home and get the $250,000 or $500,000 gain exclusion (under IRC code 121) providing they meet the requirements. Later, they can move into their one-time rental or second home and claim this as a principal residence (having it qualify as a principal residence will require living in it for 2 out of 5 years). This would allow for the property owner to enjoy increases in market values while enjoying favorable income tax attributes as well. This is called having the best of all possible worlds.

In short, planning ahead will always save you money, especially if you are aware of the rules. ONe can even do a section 1031 exchange into a investment or business use property with the idea that it will become a principal residence at some later date. The 1031 exchange is like-kind property allowing the deferral of gain when acquiring a substantially similar property to the one being sold. Imagine the tax savings when this gain deferral becomes permanent when the property becomes a principal residence at a later point in time. I wish you happy planning and invite you to ask questions or listen to my radio program, "Better Business", Saturday mornings at 10ET on WBIS AM 1190 (www.wbis1190.com).

Ron Piner, CPA
Host of "Better Business"
Saturday Mornings at 10ET
ON WBIS AM 1190
ww.wwbis1190.com
www.mwibonline.com
taxguy9@hotmail.com

An Eye On Taxes And Your Portfolio
I learned something new today. Or maybe I received financial revelation. Regardless of what happened, I am about to share this combination income tax, portfolio building finding with my faithful radio listeners and article readers. Do what the hell I...

Rental Real Estate
Understanding Your Rental PropertyAdding real estate to your portfolio can be a smart thing to do. Many do this by converting their first home into a rental when they can afford to acquire another principal residence. As I have discussed before, ever...

Real Estate Tax Support
Real estate taxes various from each state. Despite this, real estate tax is often based on the outer structure and surrounding features of your home. For instance, if the structure of your home is new, you taxes are based on the equity on this home.T...

Building Your Commercial Real Estate Team
Many people find that being successful by yourself in commercial real estate is very difficult, which is why many people decide to build a commercial real estate team. Sure, you can try to do it all on your own, but it is usually a great deal more ef...

Avoid Paying Capital Gains Until The Ripe Old Age of 70
How, you might ask, can I avoid paying capital gains taxes until the ripe old age of 70? Well, this tool, which has been around since the 1950s, is shockingly unknown to the vast majority of Americans. Sadly, who knows how many millions of dollars ha...

Real Estate Tax For Property
Anytime you have a home or property you will pay real estate tax. Real estate tax is estimated based on your home value. For instance, if you purchase a home and the property is worth $10,000 but you pay $20,000 for the home, thus this additional bal...

Real Estate Tax Breaks for Your Home
It is always beneficial during tax season to own real estate, which gives you many annual deductions. If you purchased residential real estate during this year, however, you can look forward to even more generous savings at tax time.Mortgage Interest...

Architectural Outsourcing
The outsourcing industry worldwide is booming. There are very few Information Technology sectors which are not into outsourcing. The question arises, that when everybody is jumping on the outsourcing bandwagon for obvious benefits, then why not the...

Home Loan Confusion Continues
Unfortunately, most Americans still do not understand how home loans work and how to take advantage of the wide array of programs available. The way I see it, people are still confused about mortgages in general and real estate finance, in particular...

Why Hire A Virtual Assistant? So You Can Save Money & Time!
You originally accepted the challenge of a real estate agent for many reasons. It may have been due to your love for meeting new people, or finding just the right house for the specific needs of a family. Then you discovered all the planning and pape...