... and does it have to be owner occupied for 2 years in order to pay less taxes on the sale of the house and how much less taxes you can pay?? How would the IRS know if it is owner occupied or not?? Does the owner have to reside in the house for the entire period of 2 years or can the owner go on a vacation for several mths during the 2 year time?? I am referring to like a house in Los Angeles. Any info. would be helpful, thanks. And how much can you sell for a house in LA that's like very old??
2007-10-09 14:52:24 · 2 answers · asked by Raines 1 in Business & Finance ➔ Renting & Real Estate
best people to ask would be tax office. they have info leaflets on nearly everything.
2007-10-09 15:00:36 · answer #1 · answered by lily 5 · 0⤊ 1⤋
To exclude the gain on sale of a principal residence you must have lived in the home as your principal residence for 2 full years out of the 5 years immediately prior to the sale. Temporary absences for school, hospitalization or vacations count as time that you live in the home. If you do not meet that test, you cannot exclude the gain from tax.
The IRS can pretty easily tell if you lived in the home or not. Such things as post office records, the address on your tax returns you filed when you weren't living there, the mailing address for the property tax bills, etc. are all pretty strong tells on whether or not you lived there. If they have any doubt, it's up to YOU to prove that you lived there.
If you rented the place out, you'll also have to recapture any depreciation that was allowed OR ALLOWABLE while you rented it out. That will increase your gain and the recaptured depreciation cannot be included in the exclusion amount even if you qualify for it and the total gain including the recaptured depreciation is less than the maximum exclusion amount.
2007-10-09 15:08:32 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋