I own two houses in two different states. One house I've owned for almost three years but have rented it for the last year. I didn't claim it as a rental last year, but if I don't sell it soon I guess I have to claim it as a rental. Do I have to pay capital gains on a rental property even though I've owned it over 2 years? Also, we've lived in our house now for almost a year and therefore didn't claim it last year. My wife and I combined probably make less than 20 thousand/year. How much capital gains will we pay in this lower tax bracket? Also, is it legal and also advisable to take out a 2nd mortgage to decrease the net gain to pay less capital gains? Is that possible? Someone told me to pay off everything we could with that 2nd mortgage to be less targetted by auditors. Does this sound reasonable? Any help soon would be greatly appreciated!
2007-02-03 13:25:16 · 4 answers · asked by uoynossip 1 in Business & Finance ➔ Taxes ➔ United States
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2007-02-09 18:05:43 · answer #1 · answered by smith g 1 · 0⤊ 0⤋
On the rental house, you'd pay capital gains for the year when you sell it, no matter how long or short a time you've owned it.
On your personal residence, you'd pay capital gains unless youve owned it for two of the five years immediately before the sale, and lived in it as your main residence for two of the same five years - in that case you could exclude the gain up to $500,000 if you file a joint return. If you haven't owned it and lived in it for at least two years, then yes you'd pay capital gains for the year when you sold it.
Taking out a second mortgage would have nothing to do with the calculation of the amount of gain when you sell the house, so no, that wouldn't help any.
And no, the statement that you should pay off everything you could to be less targeted vy auditors does NOT sound reasonable.
2007-02-04 00:12:22 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
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2007-02-04 03:09:53 · answer #3 · answered by Anonymous · 0⤊ 0⤋
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2007-02-10 04:33:02 · answer #4 · answered by rachel c 1 · 0⤊ 0⤋