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Old 05-13-2016, 01:46 PM
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Tax implications for selling rental property

Hi. My wife and I have owned a condominium in San Mateo, CA for eleven years and are seriously considering selling it. My real estate agent suggested getting some advice before taking that step. We have rented out the property since 2010 and have no plans to move back in for two years to avoid taxes nor do we plan to buy a different rental property. From what I understand and have read about the sale will be subject to capital gains taxes (not sure what rate), but is there anything else we should be considering from a tax perspective? We're not desperate to sell but it just doesn't seem worth it anymore when you factor in high property taxes and being taxed on the rental income which is basically like having another full-time money earner living with us. Any help or advice is appreciated.

Thanks!

Dan



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Old 05-13-2016, 04:44 PM
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Hi. My wife and I have owned a condominium in San Mateo, CA for eleven years and are seriously considering selling it. My real estate agent suggested getting some advice before taking that step. We have rented out the property since 2010 and have no plans to move back in for two years to avoid taxes nor do we plan to buy a different rental property. From what I understand and have read about the sale will be subject to capital gains taxes (not sure what rate), but is there anything else we should be considering from a tax perspective? =========>>>>>>>>>>>When you sell your rental property, you?ll have to pay tax on any gain (profit) you earn . you will ALSO HAVE TO recapture the sec 1250 depreciation taken previously as ordinary income taxed at 25%, NOT SUBJECT TO LTCG lower tax rate. Basically, when you sell your rental property, you effectively give back the ?depreciation deductions AKA sec 1250 you took on it. Since they reduce your adjusted basis, they increase your taxable gain. You need to report sec 1250 depreciation on Sch D of 1040The remaining gain on the sale is taxed at capital gains rates (usually 0% unless your tax rate is higher than 15%, 15% if your tax rate is higher than 15% , 20% for taxpayers in the top tax bracket of 39.6% for 2016 I guess). You need to report the gainon sale of the rental home on form 4797/ 1040. so you must complete Part III of the form 4797 to determine if you have a gain. Then enter the resulting number on line 32 and on line 6 of Part I of f4797


If you lose ?money, you?ll be able to deduct the loss, subject to important limitations. SINCE
you owned the rental property for more than a year before selling it, In this case, you must separate the sale of the structure from the sale of the land. The sale of the land is noted in Part I of form 4797, and you enter the sale of the structure there as well as you have a gain, the sale goes in Part II.


We're not desperate to sell but it just doesn't seem worth it anymore when you factor in high property taxes and being taxed on the rental income which is basically like having another full-time money earner living with us. Any help or advice is appreciated.=======>>>>>>>>>>>>>>.Instead of selling the pry as rental pty but you sell it as primary home by converting it as primary home, then, the greatest boon in the tax law for property owners is the $250k/$500k home sale exclusion. This rule permits single homeowners to exclude from their taxable income up to $250kin profit realized from the sale of a personal residence. The exclusion is $500k for married couples filing jointly. There is no limitation on how many times the exclusion may be used during your lifetime.
To qualify for the home sale exclusion, you must own and occupy the home as your principal residence for at least 2 years before you sell it. Your2 years of ownership and use can occur anytime during the5 years before you sell?and you don?t have to be living in the home when you sell it.



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Old 05-16-2016, 12:51 PM
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Hi. Wow. Thanks a lot for the incredibly detailed response. I think we've decided that moving back into the residence again is not really in the cards for us as much as we'd obviously prefer to avoid the tax penalties. Clearly I need to get a CPA involved because this stuff is very complex and want to do it right. I guess we're basically looking at it for what it is at this point - an investment.



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Old 05-16-2016, 05:43 PM
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Originally Posted by danbraunstein View Post
Hi. Wow. Thanks a lot for the incredibly detailed response. I think we've decided that moving back into the residence again is not really in the cards for us as much as we'd obviously prefer to avoid the tax penalties. Clearly I need to get a CPA involved because this stuff is very complex and want to do it right. I guess we're basically looking at it for what it is at this point - an investment.
correct; you can contact an enrolled agent or a cpa doing taxes( only a few cpas do taxes) inyou rlocal area for more professional help in detail. i do not recommend H&R block or jackson hewitt or etc



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