Tax Question: Husband has a 2nd property that we're selling. What are the tax implications?

Question

The 2nd property was used as a rental just for a few months - no longer. Do we claim as a rental? Or can we claim as 2nd residence. What are the tax implications for both situations?

Answer 1

In this case, it would be good money spent to hire an accountant to help you through the transaction.

Quite possibly, you'll have to recapture any previous depreciation taken on the rental, making that ordinary income.

You'll want someone to help you compute things properly and minimize the tax impact.

In short, your selling price less the cost of the place will be your gain. How its treated will be the challenge.

Answer 2

You would pay capital gains tax on the profit of the sale.

The tax breaks for sales of homes only applies to primary residences.

The rental income (along with the rental expenses) would go on Schedule E and Sale of the property would go on Schedule D.