The bill which was made law the end of July will cause changes for 1031 investors and what they can exclude from taxable income when they sell a property. Currently a property would have to be owned for at least 5 years, and used as a principal residence for at least 2 of those 5 years, to qualify for up to $250,000 to be excluded as taxable income and up to $500,000 for a married couple. Even if the property was used as a rental property, as long as the 2 year criteria was met the income was not taxed.
As I understand it, after 1/1/09, there is a formula for computing the qualified and non-qualified periods of ownership and only the “qualified” use timeframe would be excluding from being taxed. There seem to be some possible breaks for health problems military service or loss of job. But, needless to say, after January, 2009, anyone considering purchasing an investment property should consult their tax professional to evaluate how these changes will affect them. |
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