Rented my house the last 3 yrs, lived in it the 2 previous yrs. When selling will I pay capital gains penalty

Answer 1

if you sold you house today,, you'd look back five years,, five years from the day you sell,, if you lived in the house and it was your main home for 730 days during that five years, you can exclude up to 250K gain,, 500K gain if married filing jointly
main residence for 2 yrs total out of the previous 5 years,,

main residence for 730 days out of the previous 5 yrs

capital gains is not a penalty

you will be paying tax on the depreciation that you took or could have taken for the 3 years you rented the house, but you didn't ask that did you??

Answer 2

Hi, The preceeding answers were correct in the Section 121 exclusion(s), for a once personal residence converted into a rental. You must have used the property as your principle residence for 2 years out of the 5 years prior to sale, in order to qualify for the Section 121 exclusion of $250,000. 00 per individual who qualifies.

There may also be depreciation recapture stemming from the years the residence was used as an income producing rental property. If you did not take any depreciation, watch out, by Federal law it is "what is allowed or allowable" as depreciation which must then be subtracted from the purchase price or basis of the home used as a rental. Bottom line is that you'll pay tax on the depreciation you took or should have taken on the rental property. If you want to amend the prior years taxes to take the depreciation, you must first ask the IRS for permission, (if you failed to take it for two years) by filing Form 3115.

To play it smart, do not sell the home during 2007, wait. In 2008, you will still have lived in the home for 24 months out of the 60 months prior to sale, the capital gains rates drop to 0% for those in the 10% and 15% tax brackets and remains at 15% for those in the 25%, 28%, 33% etc. Also, talk with your real estate agent and think about paying some of the buyers closing costs so you can offset any gain from the sale, if you suspect you may have a capital gain.

Contact an Enrolled Agent, CPA, or tax preparer in your local area and ask them to run some tax planning tool software and get a better handle on the amount of gain and how different scenarios will effect your bottom line.

Good Luck!

Answer 3

You'll pay capital gains tax on the depreciation for the time you rented it out.

Living in the house two years out of the previous five to be eligible for exclusion of gain means two FULL years, counting by days, of the five immediately prior to the sale, again counting by days - did the times really break down that neatly? If you didn't live there as your main home for two FULL years (days, not calendar) out of the five immediately before the sale, then you'd pay tax on any gain.

Answer 4

You lived in the house as your principal residence I assume, and you lived in it for two of the five years prior to the sale. Therefore, you can exclude up to $500,000 of capital gain ($250,000 if not married) from taxes.

The rental will have an impact on taxes as well. The amount of depreciation you took on the house during the period you rented it will be subtracted from the gain on the house, and will be added to your regular income. It will not be taxed as capital gain, but as ordinary income.

The rest of the gain (up to the exclusion) will be tax-free.

Answer 5

Egad. no one looks to have examine irs pub 523. on the date of sale you seem back 5 years. in case you lived interior the living house for 2 of those 5 years (no longer even continuguously), owned it for 2 of those 5 years and have not offered yet another living house interior the final 2 years, you're eligible for the $250K exclusion. in case you lived 2, rented 2 and then it somewhat is vacant, you in basic terms have 365 days to close.