Suppose you rent out and depreciate your house for let's say 10-15 years, then move back into the house and live for 3 years (so that you would qualify for capital gain exemption), then sell it. What is the base (cost) you use to calculate capital gain? Do you use the after-depreciation figure as your base (which could be very low) even though it's not an income producing property anymore?
2007-01-24 01:32:08 · 4 answers · asked by spot 5 in Business & Finance ➔ Renting & Real Estate
Id be willing to venture that the depreciated value would be the basis. Unfortunatley, if you think logically, if you used the original purchase price, not only would you be getting the depreciation tax shield, but then youd also get a shield for that same depreciated amount for capital gains, in effect, youd be getting double tax benefit from the same dollar amount. That doesnt sound very IRS friendly.
Look at it this way, if you owned an asset for a business, gain on sale is calculated as sales price-book value, which is of course, original cost-depreciation. I imagine it works similiarly for finding the basis on rental property.
Im not a tax expert though, youd probably want to consult with someone who is.
2007-01-24 01:41:54 · answer #1 · answered by M O 6 · 0⤊ 0⤋
While I think you should have a CPA look at this, you should be able to roll over the proceeds from the sale into another house and defer the tax. This is true in either case. If you roll over investment property into other investment property, you use a 1033 exchange. On a primary residence, you have I think one year to purchase a new house. If you sell and do not use the above deferment mechanisms, you will have to pay tax on the gain based on the depreciated value. But check with a CPA.
2007-01-24 01:50:42 · answer #2 · answered by spirus40 4 · 0⤊ 0⤋
From 2008 to 2010 the long term fee is 0% for those interior the ten-15% bracket. keep in mind that any the factor of any income that is above the bracket might nonetheless be at 15%. i don't understand the size of the brackets, of path, yet while the taxable income shrink for the 15% bracket have been $30,000, you had $20,000 generic income and $50,000 LTCG, purely $10,000 might get the "greater advantageous favorable" therapy (5% now, 0% later), the different $40,000 could be on the regular LTCG fee of 15%. See the link decrease than for one reference.
2016-12-12 19:12:05 · answer #3 · answered by ? 4 · 0⤊ 0⤋
If you move back in for 2yrs. You will not pay any gain under 250k. 500k, if you are married.
2007-01-24 02:06:50 · answer #4 · answered by robert s 2 · 0⤊ 0⤋