capital taxes on half owner occupied duplex
Hi,
I bought a duplex almost 3 years ago and lived there the whole time. I could sell it for a nice gain, however I've been told that I cant have the $250k exclusion since its a duplex even though its been my primary residence because I rented out the upper. Is this true?
Partially true. The sale of the duplex will be treated (for tax purposes) as two separate transactions. The first transaction is the sale of your primary residence. The second transaction is the sale of investment property (the rental unit).
The share of the sale profits resulting from the sale of your primary residence is eligible for the capital gains exclusion. The share of the sale profits resulting from the sale of the rental unit is subject to capital gains taxation and depreciation recapture.
Of course, you can always defer the taxes by using the rental unit as the up-leg in a 1031 tax-deferred exchange.
Thanks for your response, very helpful.