Capital Gains/Taxpayer Relief Act of 1997

[MacGyverIt]

Fellow Mustachians,

Has anyone leveraged the capital gains avoidance provided by the Taxpayer Relief Act of 1997?

http://www.bankrate.com/finance/taxes/capital-gains-and-your-home-sale-1.aspx

I'm considering selling a rental next year in order to avoid capital gains tax. I've lived in the property for two of the last five years. The property has increased in value ~75k (estimate) since purchase so I'd rather not lose 35% of that to the government. I don't intend to move back into the property (would increase my commute waaay too much).

The property is cash flow positive at $500 a month after all expenses but my thinking is $500 a month is a long way away from the ~26k I'd lose to the government after the sale.

Is it this straightforward?

[branman42]

I have not personally used this, but from others who have used this, it seems to be very straightforward.

However, your capital gains tax should not be 35%. Remember since you have held it for over a year it would be somewhere between 15-24% depending on your income. (Most likely 20%)   

I still definitely understand why you would want to sell it, but make sure you use those numbers to compare the options to see if it's worth it.

[CareCPA]

It's very straight forward if it was only your primary residence. It's less straightforward if you used it as a rental.

ETA: I need to do additional research on gain allocation and the interplay with the personal exclusion. There is definitely depreciation recapture, though.