David Moore of Equity Advantage and Rene Nelson of Pacwest Commerical Real Estate discuss an important question many homeowners find themselves pondering: “What do I do with all this equity trapped in my house?” This is especially true when health issues arise or as retirement approaches, where income may decrease and financial pressures increase. It can be tough to navigate these waters, but let’s break it down.
Understanding Section 121
First, let’s talk about Section 121 of the IRS code. This provision allows individuals a $250,000 exclusion on capital gains when selling their primary home, and married couples can exclude up to $500,000. To qualify, you must have lived in the property for two out of the last five years. This means that it’s not just about the value of your home at the time of sale; it’s about any two-year period within that five-year window.
The Importance of Evaluating Your Home
Many people come to us referred by tax professionals or lawyers, seeking advice on how to unlock their home equity. A common suggestion is to consider moving out temporarily. This can help you to sharpen your focus on your financial needs and explore how to make your home work for you.
What Happens When You Move Out?
By moving out of your current home, you can potentially take advantage of the capital gains exclusion. If you’ve lived in your house for a significant period, you might be sitting on a goldmine of equity that can be tapped into for various needs, whether for medical expenses, retirement planning, or even home renovations.
Real-Life Scenarios
Let’s look at a few scenarios where homeowners successfully unlocked their equity:
- Health Issues: When medical expenses rise, tapping into home equity can alleviate financial stress.
- Retirement: Many retirees find that their income decreases, making it essential to access home equity to maintain their lifestyle.
- Home Improvements: Using equity for renovations can increase your home’s value while making it more comfortable.
Why Consult Professionals?
It’s vital to consult with professionals who understand your situation. Whether it’s a tax advisor or a real estate expert, they can provide insights tailored to your needs and help you navigate the complexities of home equity.
Summing It Up
Don’t let your home equity sit idle. Consider your options, consult with experts, and take proactive steps to unlock the financial potential of your home. This can lead to greater peace of mind, financial stability, and the opportunity to enjoy the life you’ve worked hard to build.
Ready to Explore Your Options?
Take the first step today. Evaluate your home, consult with professionals, and discover how you can turn your home equity into a powerful financial tool.
To stay up to date with our video content subscribe to our YouTube channel.
Whether looking for information on simple to complex 1031 issues, Cost Segregation, Life Insurance Contract Sales, DSTs or even Qualified Opportunity Zones you will find information on our channel.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
