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Can you share tax-saving strategies for the sale of a second home or of rental property?

Many people who are buying or selling San Diego foreclosures and REO's are asking this question. Of course, it depends on the person who invested in the San Diego foreclosure or REO, but if the circumstances are right, it is possible to share tax savings on the San Diego foreclosures and REO's that you invested in. Here are a few points to bring up the next time you speak to your tax professional.

The 1997 federal tax law, which allows homeowners who sell their home to exclude some or all of the gain from their gross income, doesn't directly impact the sale of second homes, but it has two indirect impacts. First if you move into a second home or rental property and live there for two years, you can call it your personal residence and exclude from your gross income up to $250,000 per person, or $500,000 per couple, of any sales profits. That has a lot of retirees moving into their vacation homes.

Second, the law creates different tax rates for capital gains versus "recaptured depreciation." This can be very tricky territory; if you have depreciated your rental house, talk to a tax accountant about what this might mean.

Either way, it is great to know that this option is a possibility, and serves as a springboard for when you do sit down with your tax professional, and want to have that very important conversation about tax saving strategies.

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