I have a home that I've been renting for ~4 years. I am planning on moving back into the home mid next year. What are the tax (as in IRS) implications that I will need to be aware of? Obviously once the renters leave, I will no longer have the rental income to offset the amortization/depreciation. Will additional forms need to be filed or is it as simple as stating 1/2 year of rental income and depreciation? Thanks.
2007-11-01 06:58:17 · 4 answers · asked by B 1 in Business & Finance ➔ Renting & Real Estate
To add to William H's otherwise correct information, when you sell the property you will need to recapture any depreciation that you claimed OR COULD HAVE CLAIMED while you rented out the property. This recapture is taxed as ordinary income EVEN IF you otherwise qualify for the exclusion. This is a common pitfall that many taxpayers forget and since the IRS knows that the property was rented out in the past they may be looking for the recapture once the property is sold.
2007-11-01 08:34:04 · answer #1 · answered by Bostonian In MO 7 · 0⤊ 0⤋
Converting the property to your primary residence means you will no longer be able to perform a 1031 tax deferred exchange.
Once the property is no longer in service, you will no longer be able to take depreciation. Depreciation can be used to offset income (not the other way around).
Once you move in, the time clock starts ticking for your primary residence exclusion of capital gains of $250,000 for a single person, double that for a married couple. Typically you need to live and own the property two of the last five years to qualify. If you exchanged into the property then you need to own the property for five years.
2007-11-01 07:08:49 · answer #2 · answered by William H 5 · 0⤊ 0⤋
Talk to your tax guy. You have to deal with the depreciation, income, maintenance, and insurance. You will have new forms to fill out. I am not sure if there are capital gains involved.
Get professional help.
2007-11-01 07:03:43 · answer #3 · answered by DonPedro 4 · 0⤊ 2⤋
nothing is that simple. Further more it varies from state to state. Also what pertained to last year may not be what is happening this year. Consult a tax professional right away so you don't make mistakes you will regret later
2007-11-01 07:01:58 · answer #4 · answered by naharashia 2 · 0⤊ 1⤋