Section 280A and Airbnb – Tax Consequences

Section 280A and Airbnb – Tax Consequences

The popularity of online rental marketplaces like Airbnb has exploded, providing a previously unavailable income opportunity for people. By blurring the lines between personal and business space, Airbnb ‘landlords’ could end up dealing with the IRS. Learn how you need to protect yourself as a short-term rental landlord. Renting out your home through a service…

Selling Your Residence Tax Free without Section 121

Selling Your Residence Tax Free without Section 121

You know that you have up to $500,000 in capital-gain exclusions when you sell your personal residence—but what if your house has more value than that? This time, we’ll talk about how to sell even a pricey residence without having to take a heavy tax “hit.” The High-Ticket Dilemma As you know, under Section 121, if you’ve lived in a house for two out of the past five years, you can sell that property and exclude gains up to $500,000 as a married couple filing jointly, and up to $250,000 as a single. But anything over and above that gets taxed as long-term capital gains. This is the dilemma that faced some clients I had in California, who had a personal residence that would represent $1 million in gain. When they saw a potential of $500,000 more than what they could exclude under Section 121, they asked me, “Clint, how can we sell this property and not pay any tax?” It’s actually amazingly simple. I told them, “Move out of your house, arrange to rent a home in your new area, and then designate this home as a rental. List it on VRBO. Put it on Airbnb. Show the IRS