Capital Gains and backyard apartment construction
I own two rental homes in Los Angeles. One has a large backyard and I'd like to sell the other one and use the capital gains money to put towards backyard apartment construction. Am I allowed to use Capital Gains money towards this construction? If not, how can I retain a larger portion of my capital gains and not have it taken for state and federal capital gains tax?
Or if not, can I use the money from the sale to pay off the principal on my own personal residential mortgage?
[{"id": "ckkkqe5", "text": "I forget the form and I am not sure of all the legalities of it but there is a form you can file when you sell a property and use the taxes you would have paid to the govt to invest in something else. I'm sure someone on this thread knows what I'm talking about. I'm not that pro at this real estate stuff yet. ", "replies": [{"id": "ckkttxb", "text": "1031 exchange. It won't work for improving a property OP already owns. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "ckktv5t", "text": "If you have significant gains, it's going to be worth your while to work with a CPA who knows tax. I'm not one, the only way I know to shield capital gains from tax is through a 1031 exchange, but it's only a deferral. ", "replies": [], "depth": 1}]