Capitol Gains On Primary Residence
I bought my home in 1995 w/ 15 mortgage. I now have $110,000 equity. I moved from the house 2 years ago and began renting it out. Some depreciation has been taken.
I moved into another condo and that became my primary residence.
Can I later move back back into the house and live there for 2 years so that I do not have to pay CGains?
Also, is it smart money to take the equity I have in the house and payoff another condo I have. Currently the market will not bear the cost of the condo so it is a loss each year. Thanks!
If you are careful about the timetable, you really have up to three years after you vacate your former primary residence to sell it and preserve your capital gains exclusion.
The two (of the previous five) year rule gives you a three year window to sell your home with no capital gains taxes, even if you rent it out in the interim. Of course, if you used the property as a rental you will still have to pay the depreciation recapture.
Converting your rental property into your primary residence will make you eligibile for the capital gains exclusion if you satisfy the two year ownership and occupancy rules.
Thanks for the information Dave. I'm glad to hear that I would be able to convert at some time in the future.
If you or someone else happens to know the second part of my question I would welcome that too.
"Also, is it smart money to take the equity I have in the house and payoff another condo I have. Currently the market will not bear the cost of the condo so it is a loss each year."
My thought on taking equity from one property to payoff or down on another would be so that the loss from lower rent would not so great. Not sure if the government frowns on that or not. Refinancing to lower my monthly cost would bring the rental income closer to my cost nd therefore a gain each month from the rent. Thanks!
I would think it would be smarter to sell the underperforming rental. But what do I know? This is the tax forum.
Since this site does not really have a smart money investment analysis forum, you may get more definitive responses if you ask this question in the Beginner Forum.