The depreciation you claim with your home-office deduction is subject to a recapture tax when you sell your home.

But you may be able to avoid the recapture tax by following one easy step when it comes time to sell your current home and buy a replacement. And you not only avoid the recapture tax, but you also increase your tax basis in your replacement home. This gives you a double dip in tax benefits.

You make this work by following IRS Revenue Procedure 2005-14, which shows you how to combine the tax-favored Section 1031 tax-deferred exchange and the Section 121 home-sale exclusion rules so that you can sell your home and

  1. avoid some or all the taxes on the sale of the personal part of your home,
  2. avoid and/or defer some or all the taxes on the sale of the office part of your home,
  3. avoid and/or defer some or all the taxes on the sale of the rental part of your home, and
  4. defer all the taxes on the depreciation recapture caused by the office or rental part of your home.

If you decide to sell your home but before you take any steps to make that happen, contact us so we can help you make this tax-saving strategy work for you.

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