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If you lived in a house for 2 of the last 5 years, then your gains of up to 250K are not taxed.

So, it seems that a strong financial strategy would find you owning several houses, moving around from one to another (this becomes a bit more difficult if you have family)


You can also deduct your mortgage interest, and you can use other properties to get loans for new properties. I really wish I had this extra income a few years earlier for the low interst rates and housing boom.

OT: Does anyone know how I can add my name to my parents mortgage and what tax implications this will have for me?

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I'm not exactly sure of the answer as I'm not a CPA, but I've asked this question before myself... If all three of your names are on the mortgage, I believe only one person (or couple filing jointly) is allowed to take the tax deductions on the interest payments of the mortgage and property taxes - this most likely will be your parents and I'd assume that they would be filing jointly so this would not benefit you in any way unless your parents want to give that up. You could rotate when taking the tax deductions. For example every odd year (2005) your parents would take the deductions and even years (2006, 2008, etc) you would take the deductions. Oh, don't forget that with real estate you can also depreciate the property value over 27 and 1/2 years or something like that and take more tax deductions.

Secondly, yes if you did own multiple properties and lived in them the last 2 of the 5 years you could sell the property and not pay taxes fo up to 250k (if married up to 500k). Sounds like a great idea, but how often do we see the price of our homes increase that much within such a short period of time. Yes the housing market has been hot hot hot such as in California, but we can't expect that to continue especially with increasing interest rates. Also don't forget the 6% commissions you pay the brokers when you sell too unless you sell it yourself.

Also another idea is if you are married you own property held seperately and rent one out while you live in one. Then sell the primary and move into your spouses while you buy again and rent the new one. Rinse and repeat. This is how a lot of people move up into larger homes.