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Old 01-10-2017, 12:36 AM
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2 primary residences 1 year. Zero income

Hello. I sold two homes this year. both could likely qualify for a primary home, but I guess since they were sold near the same time, I think I figured out you can only claim one per 24 months. One made more money so I assume I claim that as my primary residence to use without capital gains. The other was rented at nearly no gain and I put lots of money into it as it was a new home. Yard, drive, deck, put in that I think I can add that to my purchase price.

I have been unemployed for over 2 years now. I had zero income last year and now this year. I have potentially two kids I can claim, but I'm not sure how what I think is considered "long term investment" income would count with zero income. Would the kids as deductions only matter with actual income, but meaningless for investment income? I could let my ex claim them if it would be no benefit to me.

Another question to add, when I bought the house, I had a 30 day "lease option" where I put an amount down that was deducted from the official sales price. They were unsure I could get a loan fast enough. Is that amount deductible from the purchase price?



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Old 01-10-2017, 11:43 AM
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Hello. I sold two homes this year. both could likely qualify for a primary home, but I guess since they were sold near the same time, I think I figured out you can only claim one per 24 months.===>Correct; as you can see you can not simultaneously claim two primary homes.


One made more money so I assume I claim that as my primary residence to use without capital gains. ===>Good idea in terms of reducing possible LTCG tax on your return.

The other was rented at nearly no gain and I put lots of money into it as it was a new home. Yard, drive, deck, put in that I think I can add that to my purchase price. =====>It depends; Repairs and maintenance of your main home are not deductible expenses. But since you use the home as a rental property then repairs and maintenance are deductible. Improvements to your main home are not deductible, but can be added to the cost basis so you get the benefit of the improvements when you sell the home. Improvements to a rental property can be capitalized and depreciated.

I have been unemployed for over 2 years now. I had zero income last year and now this year. I have potentially two kids I can claim, but I'm not sure how what I think is considered "long term investment" income would count with zero income. Would the kids as deductions only matter with actual income, but meaningless for investment income? I could let my ex claim them if it would be no benefit to me. =====>long term investment income is not earned income but it is considred to be long term capital gain. If you sold an asset, possibly at a profit, you?ll generally pay less tax on the gain than you would pay on ordinary income, such as wages. If you are in a lower income tax bracket, you may not owe any tax on your long-term capital gain.For taxpayers in the 10% or 15% ordinary tax rate bracket, the capital gains rate is zero. If your taxable income is above those limits pay 25% to 35% on your highest taxable dollars of ordinary income. the income numbers in tax brackets refer to taxable income, or your gross income minus any adjustments and deductions.


Another question to add, when I bought the house, I had a 30 day "lease option" where I put an amount down that was deducted from the official sales price. They were unsure I could get a loan fast enough. Is that amount deductible from the purchase price?=========>> As long as you're renting it, though, your ability to claim tax deductions are limited. The money you pay into your lease option comes into play when you become a homeowner. It gets added to your purchase basis, which you can then use to reduce your capital gains liability if you sell your property for a profit in the future. For example, if your purchase price is $150k, but you also paid a $5k option fee and $250 per month for 24 months, your cost basis would be $161k -- the $150k purchase price plus the option fee plus the $6k in monthly accruals. This higher cost basis gets subtracted from your net selling price to determine your taxable profit at sale, if any



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Old 01-10-2017, 01:12 PM
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Wow! Awesome info. That's so much for taking the time to answer.

So since my income is zero, my rental income is likely under $5000 easy after expenses, does that mean long term capital gains is zero because my tax bracket is so low? If so, is there a cap on the amount of capital gains I can have to still be in the zero bracket? If not, there isn't any need to calculate all the lease option, improvements, etc. to get a lower cost basis.
There was no driveway or covering in the deck or yard work/sprinkler. I think that would add to the cost basis if needed.



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Old 01-10-2017, 06:51 PM
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So since my income is zero, my rental income is likely under $5000 easy after expenses, does that mean long term capital gains is zero because my tax bracket is so low?===>correct then I guess ur marginal tax rate?d be 10% and no LTCG tax on your LTCG of $5K.

If so, is there a cap on the amount of capital gains I can have to still be in the zero bracket?====>As said not zero bracket but 10% bracket means if youhave no taxable income at all . I mean your taxable income is zero. Then your marginal tax rate is 10% nor zero tax rate. See the table, as single filer up to $37,650 of taxable icnoem( I mean income after your std deduction/personal exemption), your tax bracket is 15% and no tax on your LTCG
Rate Single Filers Married Joint Filers Head of Household Filers
10% $0 to $9,275 $0 to $18,550 $0 to $13,250
15% $9,275 to $37,650 $18,550 to $75,300 $13,250 to $50,400
25% $37,650 to $91,150 $75,300 to $151,900 $50,400 to $130,150
28% $91,150 to $190,150 $151,900 to $231,450 $130,150 to $210,800
33% $190,150 to $413,350 $231,450 to $413,350 $210,800 to $413,350
35% $413,350 to $415,050 $413,350 to $466,950 $413,350 to $441,000
39.6% $415,050+ $466,950+ $441,000+
Source: Author?s Calculations.


If not, there isn't any need to calculate all the lease option, improvements, etc. to get a lower cost basis.
There was no driveway or covering in the deck or yard work/sprinkler. I think that would add to the cost basis if needed.===>agreed. I guess in general, say, An improvement is any type of renovation that will extend the ?useful life? of the property.as you can see, it will add value to the property for years to come and not just in the current tax year. Improvements are generally considered adding something that was not previously there, upgrading something that was existing or adapting the asset to a new use. Improvements are usually more intensive than repairs and usually involve greater cost.



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Old 01-10-2017, 07:41 PM
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Thanks a million!



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