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My parents purchased their house back in 1989 for $88,000. The value today is around $325,000ish and they want to sell but have been unable to do so. They are considering renting it out until the market gets a little better but I am afriad that if they rent it out they will be subject to capital gains once sold due to it being a rental.
They currently live in it but plan on renting another house while their primary house is being rented out.
What, if any, Capital Gains will they be subject to if they rent it out for a few years once the market thaws out?
but all improvements and repairs are tax write off. Any months it isn't rented is a write off. There are many advantages to renting a property, that's why people do it...!
but all improvements and repairs are tax write off. Any months it isn't rented is a write off. There are many advantages to renting a property, that's why people do it...!
I fully agree, but they are moving out of Raleigh and do not want to be landlords. They just want the market to thaw some before selling.
but all improvements and repairs are tax write off. Any months it isn't rented is a write off. There are many advantages to renting a property, that's why people do it...!
that write off isnt a good thing . its an expense .,... all expenses are subtracted off of the rental income on schedule e.
its not like it saves you money. your spending that dough ,it just gives you less profit from the rent.
when your expenses exceed the rent thats a real loss and your poorer.
while you can take depreciation it gets paid back when you sell up to a 25% tax rate.
What, if any, Capital Gains will they be subject to if they rent it out for a few years once the market thaws out?
As long as they used the house as their primary residence for at least two years (in total, not a continuous time period) out of the 5-year period ending on the date of sale, the gain can generally be excluded:
However, they cannot exclude the amount of gain equal to any depreciation claimed (or that could have been claimed) during the time the house was rented:
as long as you used the house as your primary in a 5 year period for 2 years you are good to go.
once you subtract the expenses against the rent and are still in the hole you can take up to 25k in losses depending on income.
up to 100k you can take the 25k, from 100k to 150k the deduction is phased out.
you have to take depreciation while its a rental .
the tax code says you will pay it back when you sell the house whether you took it or not.
the bad thing is that if expenses exceed the rent and depreciation gives you a loss if your over 150k in income you get to take nothing for the depreciation allowance yet you will have to pay it back anyway.
the risky thing is if the house isnt sold in time and you lose the exclusion.
Last edited by mathjak107; 08-18-2011 at 05:45 PM..
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