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Originally Posted by DW
On retirement, we plan to sell the house in the city, live in the country place for a while, then sell it and move to a small town we’ve identified.
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Welcome to the board, DW!
If you time the home sales correctly you can save quite a bit in cap gains taxes.
These numbers are off the top of my head but I think they're correct. You & your spouse can exclude up to $500K cap gains on the sale of your current home if you've lived in it for at least two of the last five years.
If you stay in the country home for two more full years then you can exclude another $500K cap gains on its sale too. This could be a huge number because you've presumably been depreciating this rental property for years and it's subject to recapture.
Of course this tax timing has to be compared to market values and the time of year you'd be selling. It'd be a bummer to try to save a 25% cap gain while the RE market drops 45%...
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