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Tax-Free Profits!

Double-Digit, Tax-FREE, Low-Risk PROFITS!

Want to know about one of the Last Remaining GREAT Tax Breaks for Individuals? Then READ ON!


It's Easy to Understand . . .AND. . . It's Easy To DO!*

If you have lived in your primary residence for 2 of the last 5 years, you can sell it, take ALL the profits in CASH (up to a limit of $500,000 for a couple, $250,000 for an individual) TAX-FREE. That's it! That's all there is to it . . .

  1. There is NO requirement to re-invest any of the money. (So naturally no requirement to "exchange")
  2. There is no tax "gotcha" later for taking the tax-free CASH now.
  3. And, Here's the REALLY GOOD part . . . YOU CAN DO THIS EVERY 2 YEARS!!

Show Me The Money

Let's look at a hypothetical example from the last 2 years . . .
$400,000 Total acquisition cost 2 years ago (including costs)
$110,600 Appreciation (15% 2 years ago, 11% last year - See local paper)
$510,600 Selling Price (Nice, isn't it!!)
$22,900 Selling Costs (Based on 3.5% Commission - Why Pay More??)
$87,623 Net Profit BEFORE Taxes
$ --0-- Taxes (It's tax-FREE!)
$87,623 Net Profit AFTER Taxes (SPENDABLE!)

Not bad - almost $90,000 NET Profit after taxes!
But wait! What investment was required to earn this $90,000? Well, it WASN'T $400,000 or $100,000, and maybe not even $50,000! As you may have seen in the local paper, even high-income individuals are buying luxury homes (million dollar plus homes, in some cases) with little or nothing down! Unbelievable leverage! Limited Risk!

What's the Rate of Return? A LOT!
Let's say our hypothetical buyer invested 10% of the purchase price, including loan costs, escrow costs, etc. That means she invested $40,000. What she got back in 2 years was:

1. Her $40,000 initial investment
2. PROFITS of MORE than TWICE her investment ($87,600) in just 2 years!

Let's see, $40,000 invested (which is returned on sale) for a PROFIT of $87, 600 . . . No, wait, you'd have to earn $134,800 to pay taxes at 35% and still have $87,600 left over!! I'll leave it to you to calculate the Rate of Return on a $40,000 investment that generates net profits of $134,800 in just 2 years. But, I think you'll agree -- it's a LOT!


How Great IS This Tax Break?

It wasn't that long ago that the LIFETIME exemption was only $125,000, and LOTS of couples didn't even qualify for THAT for one reason or another. If you didn't qualify (or had already used the LIFETIME exemption), your only choice was to buy a home for equal or more money, or pay TAX on the sale.

Compare the situation with rentals and other real estate (other than a primary residence, that is). There, generally speaking, if you get CASH, you pay TAX on it. (In the stock market and elsewhere, sometimes you pay tax even if you DON'T get cash!)


So, Will It Be Available To You FOREVER??

All we know for sure is that it is available to you NOW! (It might be one of those "use it or lose it" situations.)


Disclaimer & Assumptions:

*The discussion is solely for strategy ideas for you to discuss with your legal and tax counselors. Please take no action until you have checked with your own advisors about your particular situation.

Naturally, I am NOT proposing that you sell your real estate without purchasing replacement real estate. Being out of the market altogether would appear to be a MAJOR mistake!

I have assumed that the monthly mortgage payment ("PITI", as they say), less our hypothetical investor's tax break from home ownership, was a reasonable cost for her to live in the home. Consequently, I did not deduct any holding costs from the profits.




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Terry Hunter Realtor discount real estate brokerage and loan brokerage, discounts
and rebates for homes buying and homes for sale in Irvine California also servng Orange County, San Juan Capistrano, and Newport Coast

Terry Hunter
Hunter-Broker

62 Sellas Road North
Ladera Ranch, CA 92694
949-278-1595
Fax: 949-266-8023
Email: Terry@SurfMLS.com
DRE# 00573681

Terry has over twenty-five years experience as residential broker, investment/land and business broker, licensed custom homebuilder, residential subdivider, syndication general partner and real estate investor. He is a former Air Force Officer. Terry can UNDERSTAND and relate to your wants and desires! He dedicates himself to serve all your real estate needs. Call or email Terry today!

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