The unfortunate part of this strategy is death.
However, since you have an expiration date, it’s good to know you can use the estate tax rules to avoid income tax.
Two income taxes could apply to the sale of your home:
Capital gains tax (caused by your home’s appreciation)
Recapture tax (caused by depreciation from renting the home or claiming a home-office deduction)
When you die, neither the capital gains tax nor the recapture tax applies. Instead, the federal estate tax rules take over.
This article shows you how you avoid taxes and grant benefits to your heirs by keeping your home until death.
Capital Gains on Sale of Home
You may exclude $250,000 ($500,000 on a joint return) from the capital ... Log in to view full article.