Time May Be Running Out

By
Real Estate Broker/Owner with Metro Brokers/Morningside Homes, LLC DRE# ER300941

During the Great Recession, some homeowners elected to rent their home rather than sell it for less than it was worth.

IRS tax code allows for a temporary rental of a principal residence without losing the exclusion of capital gain based on some specific time limits. During the five year period ending on the date of the sale, the taxpayer must have:14095450-250.jpg

  • Owned the home for at least two years
  • Lived in the home as their main home for at least two years
  • Ownership and use do not have to be continuous nor occur at the same time

If a home has been rented for more than three years, the owner  will not have lived in it for two of the last five years. So the challenge for homeowners with gain in a rented principal residence that they don’t want to have to recognize is to sell and close the transaction prior to the crucial date.

Assume a person was selling a property which had been rented for 2 ½ years but had previously been their home for over two years. To qualify for the exclusion of capital gain, the home needs to be ready to sell, priced correctly, sold and closed within six months.

All of the gain may not qualify for the exclusion if depreciation has been taken for the period that it was rented. Depreciation is recaptured at a 25% tax rate.

A $200,000 gain in a home could have a $30,000 tax liability. Minimizing or eliminating unnecessary taxes is a legitimate concern and timing is important.

Selling a home for the most money is one thing; maximizing your proceeds is another. For more information, see IRS publication 523 and an example on the IRS website and consult a tax professional. 

 

 

 

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

 If you would like to be sent properties on a daily or  weekly  basis just call or email me and let me know your wants and  needs. A match will be made with a home you love and with  monthly payments you can afford. I specialize in first time  home buyers and sellers who are ready to make a move.


patty@morningsidehomes.com

www.morningsidehomes.com
Cell: 720-231-5200                       CRS,GRI,WCR,SFR,CNE, MRE

 

Topic:
Home Selling
Tags:
investment property
capitol gain
rentals
irs deductions

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Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Great advice, Patty Clark - I have a few folks I need to reach out to and remind of this opportunity! 

Dec 22, 2016 09:13 PM #1
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