Q: Should I use money from sale of property to pay down my mortgage.
I want to avoid capital gain taxes as much as possible.
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A:
Using money from the sale of property to pay down your mortgage can be a wise move, but it requires careful consideration of your overall financial situation. Paying down your mortgage can reduce your monthly expenses and the amount of interest you pay over time. However, it's important to understand the tax implications.
One way to minimize capital gains taxes is to take advantage of the primary residence exclusion. If you have lived in the property for at least two out of the last five years, you can exclude up to $250,000 ($500,000 for married couples) of capital gains from your taxable income. This can significantly reduce or even eliminate the taxes owed from the sale.
Before making a decision, evaluate your immediate and future financial needs. Consider whether having liquid assets might be more beneficial than paying down the mortgage, especially in case of emergencies or unforeseen expenses. Balancing debt reduction with maintaining financial flexibility is crucial for long-term stability.
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