How to Get Tax-Free Profit From Your Rental Home

Many property owners are discovering tax-free profits on the sale of their rental property under the 1997 Tax Act. Here is what you have to do to take advantage of this opportunity.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Tax Services

1. Use your rental property as your primary residence for an aggregate of 24 out of 60 months before the sale of the property. (The months of occupancy do not have to be consecutive.)

2. Obtain a sales contract on the rental property, and close the deal.

3. Check with your tax advisor to make sure the sale of your rental property meets all qualifications for a tax exemption under the 1997 Tax Act.

Tips & Warnings

• Sales of vacation homes and second homes may also qualify for up to $250,000 in tax-free profits ($500,000 for a couple).
• Consult your tax advisor for complete details on the tax consequences of selling rental property.