[quote=FormerSanDiegan][quote=all][quote=bearishgurl]desmond, I don’t think paramount needs to worry about whether the property he’s selling is his “official residence,” or not. Any Pigg tax people correct me if I’m wrong, but he would have to make a least a $250K profit upon sale over the price he paid for each house in order to need an “official residence.”
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You are wrong.[/quote]
I second that. Completely wrong.
If you sell a property that is not your primary residence you will owe taxes on any gain.
If you sell a property that is your current residence, but previously was a rental you will owe some taxes as well, based on a prorated percentage of how much time it was not your primary residence (as of 2009, when the law changed).
The best summary of the tax laws involved that I have found are here:
Beware other sources of info that were written before the 2009 law took place.[/quote]
FSD, thanks for the clarification. I am not a tax preparer and have read the link you provided: Here is an excerpt:
…Another important exception is that property that is first used as a primary residence and later converted to investment property is not affected by these restrictions on excluding gain. For example, if you own and live in a house for 18 years and then you move out and rent the house for two years before selling it, you can receive the full amount of the exclusion. Because your investment use occurred after the last day of use as a primary residence, all of the gain accumulated over your 20 year ownership of the property can be excluded, up to $250,000, or $500,000 for married couples…
Of course, the OP would have to tell us, but I think his situation meets the exception described above. From my memory of his prior posts, I don’t think his rental house has been in service very long (1-2 years??). Before renting it out, it was his principal residence.
If I’m reading this paragraph right, the OP won’t have to pay capital gains on any portion of proceeds he nets from sale because his rental house hasn’t been in service long enough.
Is this your understanding of this exception?
paramount, how long has it been since you moved into your new primary residence and how long have tenants occupied your old house (if the answer to the 2nd question makes a difference)?
FSD, if paramount is coming up upon, say, 3 years since he turned his old house into a rental, what should he do here if he wanted to sell at least one house and avoid capital gains tax?
