Tax liability by trading down with property

[steve]

I am from the UK.
I have owned a vacation home in Florida for 6 months, it is
a new home and I agreed to buy it 14 months ago.

I am thinking of selling and 'realising' a profit. However I
would then buy a cheaper vacation property. Any profit would
be used to buy the next home and hopefully do away with or
have a reduced mortgage.

Would the profit on the first home be liable to tax, I have
looked at 1031 exchange and I am not sure I can use it as I
am trading down.

Any advice on reducing my tax liability?
Thanks

 

[Richard A. Macdonald]

I am from the UK.
I have owned a vacation home in Florida for 6 months, it is
a new home and I agreed to buy it 14 months ago.

I am thinking of selling and 'realising' a profit. However I
would then buy a cheaper vacation property. Any profit would
be used to buy the next home and hopefully do away with or
have a reduced mortgage.

Would the profit on the first home be liable to tax, I have

As it is not your primary residence, YES

looked at 1031 exchange and I am not sure I can use it as I
am trading down.

1031 is only available for business use property.

 

[Arthur Kamlet]

I am from the UK.
I have owned a vacation home in Florida for 6 months, it is
a new home and I agreed to buy it 14 months ago.

I am thinking of selling and 'realising' a profit. However I
would then buy a cheaper vacation property. Any profit would
be used to buy the next home and hopefully do away with or
have a reduced mortgage.

Would the profit on the first home be liable to tax, I have
looked at 1031 exchange and I am not sure I can use it as I
am trading down.

Any advice on reducing my tax liability?

Correct, you canot trade down.

And this has to be rental or business property and not
personal property.

So you would have a long term capital gain, which is based on the
difference between net sales price and adjusted cost basis. The
maximium tax rate is 15%.

 

[steve]

As it is not your primary residence, YES


1031 is only available for business use property.

I am sorry, I forgot to mention. This is rental property for the STR
business.