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Capital gains on a cottage

I may be selling a cottage with a significant capital gain. On the other hand, my house isn't worth any more than I paid for it 16 years ago, and it isn't likely to increase in value any time soon.

I know (or at least I think I know) that capital gains on a residence isn't taxed (what exactly is the law on that?) but since I won't ever have any capital gains on my residence, is there any way to get that to apply to my cottage?

This year I will be deep into AMT because I have very little earned income, a decent amount of dividends/interest, but a lot of deductions. Would the capital gains on the cottage affect that at all?

Reply to
jack
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When you sell your main home, that you owned and lived in as your main home for at least two of the past 5 years you can exclude the first $250,000 of gain (500,000 for some married copuples filing jointly). The law is changing so if you had business use during that 5 years you might have to prorate he exclusion amount.

So unless you moved into your cottage and used it as your main home for at least two of the five years before sale, you cannot exlcude anything.

One way to possibly lower taxes is to take back the mortgage on the cottage and that way you include on that year's gain in your income,. This is called an Installment Sale.

Unfortunately it is quite possible for a large long term gain to add to your AMT woes. And those woes include any property taxes you paid for each property, which are not allowed for AMT.

Reply to
Arthur Kamlet

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