Tax-Free Profit from a Vacation Home
Uncle Sam wants all retirees to understand that if they want to qualify for a tax-free profit from the sale of their home, the property must be their principal residence. In fact, you must have owned and lived in it for at least 2 of the 5 years leading up to its sale.
However, there’s a surefire way to get tax-free profit from the sale of a vacation home. Let’s say you sell your home and the cash you get on the break makes up to $250,000 in profit tax-free. If you then move into a vacation home you’ve actually owned for 25 years, a part of the profit on the sale will be free from taxation, as long as you make your vacation home your principal residence.