Q: Im selling two adjacent properties in Texas one is our primary residence, w/loan second no mortgage.

A: When selling two adjacent properties in a single transaction, it’s important to carefully consider how the funds are allocated to maximize your tax benefits. Since one property is your primary residence, you may be eligible for the capital gains exclusion on up to $250,000 of profit ($500,000 if married filing jointly). Ensuring that the sale agreement clearly distinguishes between the two properties can help in applying the appropriate tax treatments to each.

You can work with the buyer to structure the purchase price allocation between the two properties. This means that even though there is one transaction, the funds received can be divided according to the agreed values of each property. Proper documentation and a detailed sales contract are essential to reflect this separation accurately for tax reporting purposes. Consulting with a real estate attorney can ensure that the agreement complies with Texas laws and IRS regulations.

After the sale, you will report the profits from each property separately on your tax return. The primary residence can take advantage of the capital gains exclusion, while the second property’s gains will be subject to capital gains tax. Keeping clear records of the allocation and the basis of each property will simplify the tax filing process. This approach allows you to benefit from the deductions available while fulfilling the buyer’s request for a single transaction.