Understanding Capital Gains Taxes in Real Estate & IRS Section 121 Exclusion

Questions about Capital Gains in real estate, calculations, rates, and potential exclusions?  Selling your home?  Learn how you could qualify for a $250,000 or $500,000 tax exclusion on capital gains under IRS Section 121—but only if you meet the two-part test! ✅

In this episode, we break down:
✔️ What are capital gains taxes on real estate?
✔️ How the IRS Section 121 exclusion works (aka the Homeowners Exemption)
✔️ Who qualifies for the $250,000 (single) or $500,000 (married) exclusion
✔️ The Two-Part Test: Ownership & Use Requirements
✔️ Capital Gains Tax rates & how much you could owe
✔️ Exceptions & special considerations (military service, divorce, rental conversions & more)
✔️ Deductions & ways to reduce your taxable gain

💡 Did you purchase a home before 1997? There are important considerations you need to know regarding the old capital gains rollover rules—we explain what it means for your sale today!

📌 Thinking of selling real estate in California? At Lucas Real Estate, we specialize in real estate sales, legal & tax strategies, trustee sales, inheritance, Prop 19, and more. Book a consultation or learn more at: lucas-real-estate.com

📩 Need expert real estate advice? Contact us at info@lucas-real-estate.com or (949) 478-1623

📢 Subscribe for more real estate & tax insights! 🔔

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Transcript

0:00

okay ready and action

0:05

okay um we are here to talk about one of our favorite topics which is capital

0:12

gains and specifically we're going to talk about the IRS section 121 exclusion

0:18

which gives you up to$ 250,000 or $500,000 deduction off the capital gains

0:23

on your house there's still a lot of confusion as to how capital gains Works in real estate uh even as recently as a

0:30

week ago we had a discussion with a potential client who still thought the rules were as they were back in the 90s

0:36

and there before so we thought it would be great to sort of take a deep dive into how the capital gains Works um

0:43

specifically on the sale of a primary residents um but it's it's really the same as if you sell an investment

0:49

property but then you don't get the exclusion although there are some other avenues then that can be explored so

0:55

let's get into it let's talk about capital gains so first of all what are capital gains well in its most

1:01

simplistic form if you make money uh you have a gain right so just like ordinary

1:07

income if you you know work a couple hours you get paid by the hour you uh obviously make money that's income uh

1:14

for most people that is taxable depending on your brackets the amount you make etc etc well capital gains works much the same way so the federal

1:20

government views it as if you buy something for $100 and then you sell it for

1:25

$150 well you've made $50 um and maybe that's how things work uh if you're trading uh you know I don't even know

1:33

what's that much money anymore uh a trading card or something like that but when we talk about real estate we're obviously talking about a whole lot more

1:38

money so uh if you buy a house for $900,000 and a few years later you sell

1:45

it for $1.5 million well you've made $600,000 and in the market we're

1:51

fortunate enough to be in sort of Newport Beach Costa Mesa Newport Coast areas like that uh but you can obviously

1:57

imagine this in in a lot of areas throughout the country you have someone that maybe bought a house for $2 or $3

2:02

million and then you know years and years down the road now it's worth 7 or $8 million so we routinely deal with

2:10

people who have enormous potential capital gains um in fact one client not that long ago uh down on the Newport

2:17

Beach Waterfront they had bought the house for $30,000 back in the 50s and now it's worth over $8 million so

2:24

literally an $8 million gain that then uh we start talking about how the capital gains work

2:30

and it very quickly becomes an impediment to Selling Houses um as we've seen and that's part of the the cycle of

2:36

problems one of the many problems with our tight real estate market because people are simply not selling they don't

2:41

want to pay those capital gains therefore there's less inventory therefore the prices of other existing

2:47

properties go up and it's just one of the many things that's kind of driving this cycle of uh causing prices to be

2:53

higher and higher and higher so we've talked about what a gain is I think one

2:58

of the most important things to realize is that the the taxes uh when it comes

3:04

to the sale of real estate changed in 1997 and we've encountered as I

3:10

mentioned even as early as last week uh We've definitely encountered clients that maybe haven't sold a home since

3:17

1997 maybe haven't sold a home ever and are looking at Old articles or talking to their parents about how it worked

3:23

back in the day um the rules changed in 1997 it used to be that you could sell

3:31

your primary residence and then essentially buy a new

3:36

primary residence and not have to pay any capital gains taxes as long as you

3:42

basically rolled it from one property to another now there is another rule in

3:48

investment properties called the 1031 exchange that maybe we'll talk about or we have other articles on where that still does apply a lot of different

3:55

rules and factors there but when we're talking about your primary residence so the home that you live in um or even a

4:02

vacation home or a second home that that rule has been dead for

4:08

what over 25 years right 1997 the rules changed um so literally you have to pay

4:16

taxes now on the sale of the home uh subject to to this IRS 121 exemption that we'll get into in a second so if

4:23

you sell your home you're going to pay taxes on the gain it doesn't matter if you're buying another primary residence it doesn't matter if you're taking the

4:29

money and putting in the stock market or you're going to Las Vegas and putting it all in black uh it doesn't matter you're

4:35

going to get taxed on the amount of the gain subject to some of the exclusions that we'll talk about so that old rule

4:41

that was in effect back in 1997 and prior where you could buy another property and just simply roll it over

4:48

and not have to pay a gain is is no longer the case so what did they replace it with so 1997 they came up with this

4:55

new rule the IRS 121 exclusion and basically it simply says that if it's your primary residence and if you're

5:01

single we're going to give you up to a $250,000 exclusion and if you're married filing jointly we're going to give you

5:07

up to a $500,000 exclusion and quite simply that that kind of is

5:13

exactly what it says right so so if you are married and you bought a home for $500,000 and then you sell it for a

5:20

million dollar well you've made $500,000 in capital gains but because it was your

5:26

primary residence because you're married finally jointly we're going to give you a $500,000 exemption and in that

5:33

particular case with that particular couple they're therefore going to pay no capital gains whatsoever because that

5:38

500,000 is the exact amount of the gain uh if it was a single F you'd only get 250,000 so if a single person bought a

5:45

house for $500,000 and then later sold it for a million they've got that $500,000 gain they're only going to get

5:53

a $250,000 exclusion in that instance and therefore they're going to have $250,000

5:59

in capital gains we'll talk about some of the other tests here in a second but now go back to that story I told you

6:05

about where the person had over $8 million in capital gains well it's great they get a $500,000 exclusion because

6:12

they do happen to be married uh and meet the other requirements but now they're still looking at $7.5 million in capital

6:19

gains uh that $500,000 is not really uh enough to necessarily move the needle uh

6:25

to push them into the the desire to sell a property uh versus not sell and there and you know highlights the problem

6:30

people aren't selling you know okay boohoo $8 million but extrapolate that to a lot of ordinary houses that we have

6:37

here in you know Orange County and California you know people have million-- dollar houses and that doesn't mean they're millionaires but they

6:42

happen to buy the houses you know 10 20 30 years ago for you know a few hundred,

6:48

and all of these people have enormous gains now um and that rule prior to 1997

6:54

no longer exist and so you know like I said even to this day we have these conversations people think oh well I'm just going to buy another Prim residents

7:00

and we tell them no you're still going to pay taxes on that and it ends up being a pretty big big

7:05

deal um fun fact that 250,000 uh if you're single 500,000 if

7:13

you're married filing jointly that has not been adjusted for inflation since 1997 um lots of other things are lots of

7:20

other indexes that we work with in in real estate and taxes they get adjusted for inflation but for whatever reason

7:27

the powers that be they they get guess deliberately decided not to adjust that

7:32

and certainly taxes are a bit of a hot potato uh even when we've had some

7:37

positive uh tax reform or you know depending on your political philosophy

7:43

there you know we've had some tax reform that have made things so that people pay less taxes they still have not adjusted

7:49

that number um and you could certainly understand politically why because someone in the midwest that maybe they bought a home for 100,000 and now it's

7:56

worth 150 you know obviously these exclusions are going to be more than sufficient but when you look at these

8:02

these markets where we have enormous gains in the property value and enormously High Cost of Living such as Southern California or in a lot of parts

8:09

of California um that $500,000 it's just simply not enough um but they're just

8:15

simply hasn't been the political desire um to adjust that so if you do want that

8:21

number adjusted you should probably get on the phone with your um uh Congress person or Senator and let them know

8:27

about that because it it is quite frankly keep people in their homes which is again increasing the problem um so

8:33

let's talk about how you even get this 250 and 500 cuz it's not guaranteed it's not just simply having it as your

8:39

primary residence there's a two-part test and the first part is the ownership test and the second part is the use and

8:46

residency test so quite simply you have to have owned the property and used it as your primary residence for two of the

8:52

prior five years well what does that mean there's lots of asteris and everything right so if you bought the

8:58

house 10 years ago and you've lived in it as your primary house for 10 years no

9:04

problem right there there's no question it's your primary residence you getting the full amount um if you bought the

9:10

property only a year ago and even if you're using as your primary residence too bad you have to

9:16

have owned it and had it as the primary residence for two years so that's that's a pretty clear-cut case right you've

9:22

owned it for a year and a half you're not going to get any of the benefit wait six more months until you sell your house right you've owned it for 6 months

9:28

you got to wait a lot longer um where the gray area starts to to really exist is when people um maybe

9:35

they've owned it for 10 years but it was a rental uh the last two years well in

9:41

that example you still qualify um because remember it just has to have been your primary residence for two out

9:47

of the last five years so if you kind of reverse engineer that and do the math it means you can basically have it as a

9:53

rental for up to 3 years prior to the sale uh obviously you have to be very careful about that date and make sure it

9:58

works out but if you lived in it for two years and then rented it for two and a half years you're fine because you've

10:04

still used it as your primary residence for at least two years out of the last five and you can see how you could get

10:10

very creative with these examples um but obviously if you've rented it for more than the prior three years then you're

10:17

going to be in trouble so if you come to us and you say hey it was my primary residence for 20 years but I've rented

10:23

it out the last 3 and 1 half years to a tenant you're completely out of luck

10:28

because then if we look back at The Last 5 Years you only have a year and a half of personal residency and the three and

10:34

1/ half years of the tency so in that situation you would be out of luck you'd need to move back in uh get that

10:41

additional six months uh assuming you can still kind of bookend it in the time frame because remember you only have

10:46

that that trail of five years right so it doesn't matter what you did 10 20 years ago with the property all that

10:52

matters is is how it was used the last 5 years so that is the situation that that we do find um people are in where

10:59

they've simply rented it for too long and and they're out of luck um so that's pretty easy on the residency there are

11:08

several exceptions um service members uh for example so if you're in the military

11:15

uh intelligence peace Peace Corp um maybe you work for the state department

11:20

maybe you're a a a spy you know whatever it is um there are exceptions though I

11:26

guess if you're a spy you're not necessarily reporting this to the IRS but there are exceptions for certain types of Employments uh military service

11:32

obviously being the the most obvious there um where then then then you do get additional time um death of a spouse a

11:40

separation or divorce um properties that were destroyed or

11:46

condemned um there are some some pretty decent exceptions to the rule so you

11:51

know if you have a unique situation um reach out to your tax professional or there's an IRS

11:57

publication 523 which goes into detail about some of those other exceptions um but just cuz oh I was sick

12:04

I didn't feel like selling it or I was going to pay too many taxes or oh it wasn't on my radar no no that's going to

12:09

fly um these have to be legitimate exceptions um uh to some of these rules you can look into uh but otherwise the

12:16

used residency it's usually pretty straightforward but there are people that have some very very creative issues

12:21

um usually involves having had it Rental um one thing that comes up a lot

12:26

is well what if you're married what if you just got married well that's kind of a fun one um so let's say for example

12:33

you you own the property for the last 10 years used it as your primary residents but you just got married uh a year ago

12:40

um now do you get the full 500,000 or do you only get the 250 um well each spouse has to meet The

12:50

Residency requirement but not necessarily the ownership

12:55

requirement so in other words your spouse has to have lived lived there for the last 2 years in order to to get that

13:04

full 500,000 but doesn't necessarily have to be an owner so that's a pretty

13:09

limited exception but you can Envision a situation here's a pretty easy situation uh where we're unmarried uh lived with

13:15

your girlfriend or fiance for the last you know three or four years but you only got married a

13:22

year ago well in that case now you're going to get the full 500,000 because even though you you've only well I guess

13:28

we we're we're assuming about the title only um the title doesn't matter in the marriage situation right it's just the

13:35

The Residency so when it comes to marriage all you have to worry about is the residency so one spouse can be the

13:40

owner but you still both have to meet the residency requirements so that is something that does uh come up a lot

13:47

where maybe someone owned a home for a very long time they just got remarried you know a year two years ago or or the

13:52

spouse just moved in a year ago it's not going to be enough you're going to have to wait that that full two years um but

13:58

you don't have to put the on title which is sort of a common misconception so we've seen that people come in and say oh I've got to have my spouse on title

14:03

for 2 years no um so if you've lived you know you were uh unmarried or heck even married and you've just lived there for

14:10

5 10 years but you just never uh added your your spouse to the title that's fine um so that's sort of one of the one

14:16

of the things that we see come up with a lot uh okay so that's pretty much it the

14:22

ownership test and the use test you got to have both so to recap quite simple you got to have owned it and used it as

14:28

your primary resident for at least two of the prior 5 years and then you get

14:34

the 250,000 if you're single 500,000 married finally jointly um let's talk

14:42

about capital gains in general let's kind of go back to that so we obviously talked about any of the profit from the

14:49

sale is what's going to you know be taxed upon um we gave some examples to that

14:58

let's talk about the current rates so these sort of change every year um we've been keeping track of this for several

15:04

years and they've gone up a little bit um there were some significant changes a while ago and and these you know unlike

15:11

that exclusion amount these sort of have been automatically uh set to to escalate

15:16

now interestingly the numbers that we're about to go over um uh or I'm I'm sorry

15:22

the these these numbers um some of the other things when we get into estate taxes and stuff are actually going to

15:27

sunset in in 20 25 at the end of the year here um but these capital gains rates so this is for 2025 so if you're

15:35

single the rate is anything up to $ 48,3 is zero so if you just make you

15:43

know $20,000 on the sale of your home there's going to be no capital gains anyway whether or not you'd apply for

15:48

one of these exclusions or not nothing anything between 48,3 51 500 33,400

15:59

you're in the 15% federal rate anything over 533,000 you're in the 20% federal rate

16:08

uh we'll talk about States in a second so that's the single filers so if you're married filing jointly the numbers are

16:13

bigger but they're not necessarily double um you do get up to $96,700 at that zero amount so that kind

16:22

of roughly is nearly double um so again if you're a married couple filing

16:28

jointly you make $90,000 on the sale of your house well no capital gains do just

16:34

as that and if you have other capital gains add on to that you might but if it's just that home you're not going to have any federal taxes due because

16:41

you're under that threshold $96,700 all the way up to 600,000 is the

16:47

15% rate and then over $600,000 50 you're in the 20% rate so uh 600,000 is

16:55

is a pretty decent amount right so again if you're selling that house and you've got the seven or $8 million capital

17:02

gains you're clearly going to be in that 20% bracket um and let's talk about how this works in a second here um first of

17:11

all one of the other things we got to keep in mind is that if you're modified adjusted gross income is over $200,000

17:17

for individuals or over 500,000 for a married couple you're going to get an additional 3.8% tax which is part of the

17:25

Affordable Care Act or the a AKA Obamacare Act so uh going back to those numbers you

17:32

could certainly be in a position where maybe you're only in a 15% federal rate or you're bumped all the way up to 20%

17:38

but if you're over 200 for individual or 250 for the married couple you're going to have an additional 3.8% so those

17:45

numbers really then go up to what 18.8% and

17:50

23.8% respectively so that's that's kind of a big deal and a lot of people sort of forget about that um then your state

17:58

tax right so a lot of states have taxes not all um if you're unfortunate or

18:04

fortunate enough to live in the state of California we're in one of the highest tax brackets and that can go all the way

18:09

up to 14.4% for over a million now interestingly interestingly in

18:16

California we don't really deal with capital gains California says I don't care how you make your money um they're

18:22

just going to treat it all ordinary income so those brackets that we talked about earlier those are the federal brackets when you go to pay your

18:28

California state taxes it's totally different so if you have that $600,000

18:33

gain from the sale of a property uh let's say you make $500,000 from other

18:38

ordinary income or other sources you're now making $1.1 million uh per year

18:44

California's just going to look at that at a whole and then tax you based on that so if you're over a million you're

18:50

in that highest bracket of 14.4% obviously going back to that Newport Beach house where they're making

18:55

the $8 million profit um they're going to be in the highest federal tax at 20%

19:02

they're certainly going to get that extra 3.8% Obamacare tax and now they're going to be in the

19:09

14.4% California bracket and that number is uh significant so high earners in

19:15

California you can expect all the way up to

19:22

38.2% um that's a significant number so 38.2% um that's that that's you know

19:29

well over a third of the amount um you can see how that's a big number now other states treat capital gains

19:36

differently um some might not even have any uh income tax at all so uh you know

19:42

versus a California resident you're saving that 14.4% which is obviously very

19:47

significant right um going back to those Federal numbers uh so fun fact is that

19:53

the IRS capital gain rates they're they're based on your total income for the year but you pay taxes on the

19:59

capital gains so so what do I mean by that so if you so we talked about those

20:05

exclusion numbers right let's stick to the married filing jointly for a second and over $6,050 was that 20% number so let's say

20:12

for example you only made only you made $500,000 on the sale of your home right

20:18

so let's use that nice easy example you bought it for $500,000 you know 10 years ago uh whenever it was you sold it

20:24

yesterday for a million dollars so you know you you've made half a million dollars but um let's say you and your

20:30

spouse combin to make an extra $200,000 a year in ordinary income well your total income for that year now is

20:39

700,000 that's the number that the IRS is going to use to pick your rate so

20:46

even though your capital gain was in the 15% bracket because your overall income

20:53

is in that 20% bracket you're going to pay 20% on the capital

21:00

gain and now take that back to some of those other earlier examples so you know

21:06

even if you only make you know $100,000 on the sale of the property in and of itself that shouldn't be subject to

21:13

capital gains but you make $800,000 in some other ordinary income

21:20

well now you're in that higher bracket and therefore you're going to get taxed

21:25

um on the gain so that's also sometimes a very confusing situation that people

21:30

find themselves in um cuz even some people you know we deal with people who again make enormous gain just because

21:37

they've owned the property for so long but you know maybe they only make 30 40 50 60 Grand a year or they're on some

21:42

sort of fixed income or social security or whatever it is that can still sometimes be enough to sort of push them

21:48

into other brackets um so that is uh unfortunate they they uh they definitely look at it at at a whole um so important

21:56

thing to um to keep in mind total income uh we talked about the state of

22:02

California so all their different brackets um and again that's a it's a significant um High bracket and again

22:09

why you see just some people just not selling their houses so uh let's talk about some of the other things that you

22:16

can use uh or that'll go into this this capital gains rate um and to figure out

22:23

the actual profit so people all the time say well you know uh what else can I include hey I've done Capital Improvements over the years everyone

22:29

kind of hears about that so typically speaking uh a lot of your expenses and your Capital Improvements are are also

22:36

going to be uh not taxed essentially right or you take that off the gain so

22:41

uh let's let's give an easy example and then we'll get into some of the specifics if you for example bought that

22:46

property for $500,000 you sold it for a million so we talked about in theory now you've got that $500,000 gain but let's

22:52

say you had um $50,000 worth of closing cost in that so you've got maybe some realtor fees got some escro fees title

22:59

fees maybe there's a county tax transfer tax um you know all sorts of other fees that are easily going to start to add up

23:05

well so that example of the 50,000 you take that right off the top so now instead of having a $500,000 gain we've

23:11

only got a $450,000 gain so that's sort of the easy low hanging fruit any of those closing costs uh are going to be

23:18

able to be deducted um but improvements as well so so using that same example let's say uh they did a

23:25

$100,000 uh uh kitchen room Model A couple years ago well we're going to be able to deduct that now so now we're

23:31

going back to that they've got a $500,000 gain but they've got $50,000 in closing cost so we go down to$ 450 now

23:38

we also get to take that $100,000 Remodel and deduct that so now we're all the way down to 350 so so you

23:44

can see how those improvements can be a really big deal um and obviously sometimes especially some of these higher-end properties you know people do

23:51

uh you know 200 300 400 $500,000 improvements maybe you do an addition we've had people do you know seven

23:57

figure remodels jobs or or additions to properties so all of that really can add up uh some of the the examples that the

24:04

IRS absolutely does count as an improvement would be uh an addition such

24:10

as a a new bedroom or an add-on to a bathroom a deck a garage a porch a patio

24:16

um any sort of actual addition where you're adding square foot or adding to the structure that's definitely going to be counted uh a lot of landscaping can

24:23

get counted so uh lawn and grounds uh Landscaping uh hardscaping maybe you put

24:28

a new new driveway walkway a fence retaining wall swimming pool uh you know you do a giant backyard REM all you had

24:34

a swimming pool a built-in barbecue all those sorts of things uh are going to be able to count as as improvements systems

24:42

such as heating systems central air conditioning HVAC furnace duct work

24:47

Central humidifier central vacuum air water filtration systems wiring security systems lawn sprinkler systems all those

24:55

things count um towards the the deduction that you're going to get uh exterior work they specifically call out

25:01

storm uh window doors uh new roof new siding um things such as installation in

25:08

the Attic walls floors pipe duck work Plumbing such as a septic system water heater softwater systems filtration

25:16

systems interior work such as built-in appliances um kitchen modernization

25:22

flooring wall to--all Carpeting and fireplace are some of the items specifically called out um but many

25:28

things do not qualify so generally speaking they don't want to see repairs or or you cannot include repairs so if

25:36

you had to repair a furnace for you know let's say $500 repair job that is not

25:41

going to count but if you replace the furnace and let's say you spend 1,000 2,000 5,000 whatever it is to replace

25:47

the furnace that will count so there's definitely a distinction between the repairs uh in the improvements so

25:53

repairs do not count improvements do count um now there's a whole IRS

25:59

publication uh publication 523 that goes into a lot of detail on all of this uh some of the exclusions to the 120 uh one

26:06

thing that we talked about as well as some of these improvements that either can or cannot count um uh some other

26:13

examples of things that do count we talked about this we talked about the commissions uh legal fees maybe you've

26:18

got an attorney involved in the process as well um that's certainly certainly a service we provide in common on the East

26:24

Coast um there's a lot of additional things that that can count um charges

26:31

for the utilities we talked about legal fees uh survey fees transfer fees title

26:37

uh taxes uh all of these things uh can definitely get

26:42

included um and we talked about just generally speaking not uh I repeat not

26:48

including um the uh uh repairs um let's talk about

26:58

any other magical solutions to avoid capital gains well unfortunately those are really the big ones right going back

27:04

to your improvements oh one of the things that comes up all the time in fact we just had some clients we helped sell a house uh here in Costa Mesa they

27:11

had owned the house literally over 50 years and this question comes up all the time how on Earth do I go back and and

27:18

figure out all my improvements that I've done over 50 years well that that's that's a tough one so for any new

27:24

homeowners out there certainly start keeping a list uh get a little spreadsheet a Google doc whatever you

27:29

use um you know and start trying to keep track of it you know um but gosh you

27:35

know you you you sell a house and you trying to look back and recreate 50

27:40

years worth of expenses that's going to be challenging um there's no hard set rule

27:47

about the documentation you know you don't necessarily have to have a receipt per se um but you know how do you

27:55

approve or disprove an improvements so uh um you know we tell clients obviously you know try to look through boxes of

28:01

receipts you know try to find out what you have but ultimately um you know

28:07

sometimes you you just don't have that information uh maybe you go back through family photos and try to see oh remember

28:13

the house uh you know here here's a photo of us in the 1970s with the old kitchen and you know now we're staring

28:19

at a brand new kitchen so we know obviously at some point in time we did a giant kitchen remodel um maybe we can go

28:24

down to the city search for some building permits uh things like that that might give us a clue um it's it can be challenging but the

28:32

the burden is you know sort of on you the taxpayer to figure out that number um and then obviously if you get audited

28:39

uh then you're going to have to you know substantiate that um and obviously receipts invoices things like that are

28:46

the gold standards certainly if you did a giant remodel last year we would expect you to have that but you know if you say Hey you know uh back in the 70s

28:53

I did an entire kitchen REM model um you know it's perfectly logical that you might not have receipts for that but

28:58

you're you're definitely going to need um something right some way to substantiate the work that was done and

29:04

the amount that you're claiming for it so so I wish there was a better magical answer to that um if you are aware of

29:10

one please feel free to to leave it in the comments or or let us know um because that issue does come up a lot so

29:17

the best thing we can do really is tell people obviously if you're preparing to sell your house you know start thinking about that you don't necessarily have to

29:24

come up with these lists uh or the amount until you actually file your taxes but you know if you're preparing to sell your house and and especially if

29:31

you're analyzing what your taxable um event is going to be that's something that you need to start looking into so

29:37

uh so going back how do you avoid capital gains well you know you you've got potentially the IRS the section 121

29:43

the the 250 or the 500,000 you've got any sort of improvements you've got any sort of you know closing cost um but you

29:50

know that that that's that's really it um you know sometimes people can get

29:55

creative there's um installments sales you could do you know if you're selling to a buyer and you know potentially get

30:01

them to to to you know pay you over time it doesn't avoid the tax but then you can you can pay the tax along with the

30:09

amount of money that you're getting each year uh so we've seen some people sort of strategically look into that but

30:14

that's not really an option for most people they want to get paid uh or they have to pay off a loan or things like that um there are some interesting

30:22

creative things with Del Delaware statutory trust um we talked about sort of the 1031 um these are all sort of

30:27

bigger other topics that we can get into um in in other episodes and we do have some articles and videos especially on

30:33

the 1031 exchange um but for most people you know this this is it you're you're going to sell your primary residence and

30:40

especially if you're in some of our markets you're going to potentially have an enormous capital gain and literally

30:46

that is keeping some people from selling their houses um even with Prop 19 which

30:52

we have lots of Articles and videos on you know you might be able to roll over your property tax assessment so you

30:57

bought that house for $330,000 you know in the 1950s you've got a nice low property tax bill you you can take that

31:03

nice low Property Tax Bill and take it to a new property um and we can talk a lot more in depth about that but that

31:09

doesn't do anything for the capital gains and that's just a lot of the misconception out there unfortunately uh you know people are excited about oh I

31:15

can roll over my property tax basis or you know oh some sort of other benefits like that but then they realize oh wait

31:20

a minute but I'm going to pay you know 38% or whatever it is you know in

31:25

capital gains and and that becomes a big problem um so I think that is pretty much our

31:31

summary of the day for capital gains uh what it is as well as understanding that

31:37

IRS section 121 exemption if you have additional questions uh please feel free

31:42

to reach out to our office uh we do strategize this if you're looking to buy or sell a home in in the Newport Beach

31:48

or Costa Mesa areas or some of the surrounding communities that's obviously what we do uh and we'd love to talk to you about that and help sort of

31:54

strategize that for you uh if you're in other areas we definitely do um paid consultations a lot of people do seek us

32:00

out they just sort of want some informal legal advice or tax advice or maybe you're already working with another

32:05

realtor agent you just want a second opinion um so we do a lot of that so you can head over to our website and book a

32:11

consultation that's Lucas realestate.com Lucas is lcas hyphen real R hyen estate

32:19

est.com uh you can give us a call 949 4781 1623 and you can follow our various

32:25

social media channels where you can find uh informative articles videos uh blogs

32:31

podcasts all this good stuff uh for additional information and that's it for now thank you for joining us