Options to avoid capital gains from 2nd home
My husband worked a few years in Colorado and moved back to Illinois where we have a townhome. We continue to have property in Colorado and have since bought a summer home in Michigan. Can we purchase the Colorado property through a self directed IRA for rental use and not pay capital gains?
Terry Says
No. There are so many caveats about this strategy although it is often promoted.
The first and most basic rule is: You cannot use a self-directed IRA to purchase real estate you own. Nor is there a middleman way around this!
Read this: https://www.iraresources.com/blog/7-must-know-self-directed-ira-real-estate-rules
If the property has been your primary residence for two years, and is your primary at the time of sale, of course on a joint return you can deduct up to $500,000 of capital gains. If you haven’t reestablished residence in Illinois (taking out a homestead exemption, filing an IL tax return), then you may be able to use the residential capital gains exemption when selling.
