In this episode of Protecting and Preserving Wealth, we kick off a two-part series on the real estate sale process by focusing on selling a primary or principal residence. We explore what homeowners need to consider—from title and tax implications to planning strategies and insurance coverage—with insights from Bruce and Jason Hosler of Hosler Wealth Management.
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📍 Chapters & What You'll Learn
(00:00) – Selling Your Primary Residence: Key Considerations
(01:35) – Cost Basis & Section 121 Exclusion
(03:23) – Widow’s “Gotcha” & Step-Up in Basis
(07:24) – Mortgage Decisions & Reverse Mortgages
(10:15) – Sell vs. Rent: The Four Ts
(11:47) – Insurance, 1031 Myths & Market Trends
We start by breaking down title options: from revocable living trusts to joint tenancy and tenants in common. Bruce emphasizes that adding children to a home’s title to avoid probate is a common mistake. Instead, in community property states like Arizona, it's almost always better to hold the property inside a revocable living trust to preserve tax benefits and simplify estate transitions.
Jason walks us through how cost basis is calculated, emphasizing that purchase price and capital improvements count, but maintenance like landscaping does not. That leads into a discussion about the Section 121 exclusion, which allows homeowners to exclude up to $250,000 (single) or $500,000 (married) of capital gains if they've lived in the home for two of the past five years. We highlight a major “gotcha” related to this: widowed spouses may only retain the $500,000 exclusion for up to two years after their spouse's death, so timing the sale becomes critical.
We dive into the step-up in basis rules. In community property states, a surviving spouse can receive a full step-up in basis, which can eliminate capital gains if the property is sold after one spouse passes. This makes proper titling even more essential.
When asked whether to pay off the home before selling, Bruce says it depends on the interest rate—holding onto a low rate may be more beneficial. On reverse mortgages, Jason calls them a “Swiss Army knife” of financial tools, valuable depending on the individual’s cash flow and retirement strategy, with proceeds being tax-free.
We also talk about the trade-offs of keeping a home as a rental. If it becomes a rental for more than two years, the Section 121 exclusion is lost. Jason reminds us of the "four Ts" of landlording: taxes, tenants, toilets, and trash, helping clients decide if rental property is worth the hassle and opportunity cost. Jon shares an example of a friend who decided it wasn't.
Insurance is another key area. Bruce stresses the importance of umbrella liability insurance—inexpensive coverage that offers added protection. Jason warns that homeowner’s insurance is increasingly hard to obtain in fire- or flood-prone areas, making due diligence crucial when buying or selling.
Finally, we clarify that 1031 exchanges don’t apply to primary residences, only investment properties, and we wrap up by assessing the current market. It’s still a buyer’s market as of April 2025, but rate reductions could shift that dynamic.
In the next episode, we’ll cover selling second homes and rental properties.
For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit us online at https://www.hoslerwm.com/
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Dec 17 202514 m