It’s that time again for your monthly newsletter! Notice QR codes seem to be back? While I like QR codes and think they are handy I sure hope we all can “experience” some of the beautiful places the Pacific Northwest has to explore in person and soon!
If you are refinancing, purchasing or selling this is a must read. I tell all my clients to call me first and double check if they get any suspicious email or phone call. Do not let this happen to you!
With Tax Season coming to a close and all that paper everywhere do you feel like just throwing it all up, away or into the fire? Boy I know I do but, we have to keep some important docs and I hope this list is a good reminder.
Tax returns- 7 Years– Keep tax returns and all supporting tax docs, including W-2’s, 1099 forms, property tax info, bank statements, mortgage interest statements, cancelled checks, receipts, home purchase and home improvement info.
Paycheck stubs– 1 Year
Mortgage docs 10 years- After property has sold 7 years.
Mortgage statement’s 7 years- After property has sold 10 years
Repair bills/contracts 10 years
Home 5 Years
Life of policy +3 years
Medical 5 years
IRA contribution’s permanently
401K annual summaries-keep until you close the account
Investment statements 7 years after last account is sold.
The reason to do a 1031 exchange is to avoid capital gains taxes on investment property. Almost once a week I get asked about the sale of a primary residence. When you sell your home, you have an exemption from most capital gains taxes. A great resource to get more details about that is an IRS Publication, updated annually, called Selling Your Home (Pub 245). You could go to IRS.gov to download that.
In short, there is a 121 Exemption for capital gains taxes up to $250K per individual or $500K per married couple filing jointly. You do have to have lived in the property as your primary residence for 2 out of the last 5 years, and you can only take this exemption, once every 2 years.
This has been used in a long term strategy to avoid paying capital gains on rentals by converting the property from investment to primary residence. The IRS got wise to this strategy and put some constraints on this.
It could still be part of a plan, but reach out to your tax advisor with questions and see if this is an option for you