an additionl renta property whie i found a house to live in. So now all ihave is a 3 family house, and i ive on the third floor. How am i going to get hit with taxes? Also if I use the profit to buy a primary residence will it be ess of a tax burden? Any tips or suggestions wil be greatly appreciated.
2007-07-05 01:53:07 · 4 answers · asked by Yenny V 2 in Business & Finance ➔ Taxes ➔ United States
When you sold your investment property, did you receive cash for that payment rather than exchange it for the triplex? I assume this is the case.
Your sale of the investment property will be reported on From 4797 Sale of Business Assets. Your gain or loss will be computed considering the length of time you held the property and the depreciation you took on the property. If you owned the investment property for a long time, it is possible that your taxable gain is more than you expect due to depreciation.
When you sold your primary residence, if you owned and lived in it for the two years prior to the sale, all of your gain will be excluded from income taxes and you will not have to report the sale on your tax return.
You now own a property which is 1/3 your primary residence and 2/3 rental property. Report the rental income on Schedule E.
Reinvesting your gains on the sale of a primary residence will not affect your income taxes.
You need a tax preparer who understands the sale of business assets and reporting of rental income. Gains and losses can offset each other, it will pay you to hire someone to take care of this for you.
2007-07-05 02:43:22 · answer #1 · answered by ninasgramma 7 · 0⤊ 1⤋
Spending the profits from either or both sale on a new primary residence won't change the tax situation at all. That rule went out years ago.
For your primary residence that you sold, if you lived in it for two full years of the five years immediately before the sale, and owned it for two years of that same five years, you can exclude the gain (up to $250K, $500 K on a joint return, so it sounds like you are covered there) on the sale of the primary residence.
You didn't do an exchange for like property, so you'll owe capital gains taxes on the sale of the investment property.
As to your remaining property, if you live in 1/3 of it and rent out the other 2/3, then 2/3 of the expenses would be deductible on your return as expenses for the rental property. When you sell it, the situation will be fairly complicated so you should probably see a CPA (not someplace like H&R Block) for advice then.
2007-07-05 02:41:37 · answer #2 · answered by Judy 7 · 2⤊ 1⤋
On the sale of a primary residence, you can make up to $500k profit without paying capital gains taxes. Not sure on the investment property.
2007-07-05 01:56:47 · answer #3 · answered by Anonymous · 1⤊ 1⤋
Perhaps you should do some Research on real estate investing and capital gains.
The answers you receive here, will just be opinions. The IRS actually said that the answers that they give may not be correct and that up to 25% of them were in error!
Your local library or College Library should have some GOOD Reference material!
Thanks, RR
2007-07-05 01:58:04 · answer #4 · answered by Anonymous · 0⤊ 1⤋