Homesteading Vacation Property

Q: I just homesteaded my lake home that I have owned for five years. In June I sold my primary residence. After two years, can I sell my lake home and avoid paying capital gains tax?

A: If your lake home has become your primary residence, and you want to keep up to $250,000 in profits tax free (up to $500,000 if you’re married), you should wait 24 months after the date you closed on the sale of your prior primary residence to sell the lake property.

For more details, please check out IRS publication 523, “Selling Your Home” for more details.