Author Topic: Capital Gains/Taxpayer Relief Act of 1997  (Read 1129 times)


  • Stubble
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Capital Gains/Taxpayer Relief Act of 1997
« on: October 10, 2016, 06:29:43 PM »
Fellow Mustachians,

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

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?


  • 5 O'Clock Shadow
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Re: Capital Gains/Taxpayer Relief Act of 1997
« Reply #1 on: October 10, 2016, 09:13:12 PM »
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.


  • Bristles
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Re: Capital Gains/Taxpayer Relief Act of 1997
« Reply #2 on: October 11, 2016, 05:13:43 AM »
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.
« Last Edit: October 13, 2016, 07:57:38 AM by FrugalGrad »