< Let it sit vacant for 2 years and then sell it. If house prices remain static for those 2 years, I could walk away with $250k, tax free. The $19k in mortgage payments would be a lot less than the capital gains tax on $250k.>FWIW, my belief is that the tax consequences should not be the primary driver of an investment decision. A lot can happen in two years. The market can go sour. You also seem to assume that a vacant house will incur no other expenses. That could be a dangerous assumption. Also, if you suffer a casualty loss you may not be covered. I am not sure how many homeowners policies will pay for claims made on a vacant house. If you fail to tell them it is vacant you could be in some deep do do if you suffer a loss. What happens if a water pipe breaks and goes undiscovered for a week? That actually happened to my neighbors vacation home a couple of years ago. They were covered, but it was a very time consuming and emotionally draining process. What happens if the roof develops a leak that goes undiscovered for awhile? What happens if a pedestrian hurts themselves while walking on your property (ice, snow, etc)? You don't really fill in enough of the blanks to be able to give a full opinion. If you sell now for a 250k gain you would walk away with 212k in your pocket as the LTCG rate is 15%. There is an awful lot to say for that. In pushing real hard to squeeze out the entire 250k for yourself two plus years from now, any number of things can happen. Some of them are good , but a lot of them are bad. You already say you will spend some 19k on mortgage payments in those two years. I think it would be a mistake to assume that you will incur no other expenses at all during that time. Each added expense reduces the distance between what you would walk away with today vs your CG 2 plus years from now. Additionally, I would make very sure of my timeline. If you decided to follow your plan, you would not want to end up in a position where a delayed closing can cost you your exemption. You may want to get a few more opinions, especially from a pro who knows all of the details of your situation before you settle on any final actions. B
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