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Yes ,the gain is part of the qualifying income and can easily put itself outside the bracket..
It is hard to compete against 250k-500k in actual tax free gains keeping the exclusion ..then go buy a rental
And depreciate the rental against the rental income, paying nothing in taxes against the rental income.
The OP really needs to talk to an accountant or a tax attorney.
only you pay the depreciation back eventually if they don't want to die with the property ...all those years of depreciation came back to haunt us when we no longer wanted to be landlords in retirement . in the end the depreciation was much ado about nuttin .
It all depends on the size of the gain ....that zero percent bracket can fill up awfully fast once the gain is put in that bucket after all your other income ..
That is how it is done...all other ordinary income goes in the bucket first , then short term gains , then finally any part of the gain that still fits in the bracket goes in last.
Also state taxes don’t have a zero capital gains bracket...you get taxed regardless if there are state taxes involved
Obviously. If the gain from the sale combined with his other income is low enough to remain in the 15% bracket my point stands. OP never indicated how much gain he'd have.
Are there any states that allow a primary residence capital gains exclusion?
Obviously. If the gain from the sale combined with his other income is low enough to remain in the 15% bracket my point stands. OP never indicated how much gain he'd have.
Are there any states that allow a primary residence capital gains exclusion?
Michigan's personal income tax is based primarily upon the adjusted gross income reported on the federal income tax return (with some potential adjustments). Since a $250/500K capital gain from a primary residence is excluded from the federal return, it is not taxed on the state level either.
My question would be are there any states that don't allow a primary residence capital gains exclusion?
Hello, all you helpful people. I've a question that goes along with this topic. We have a condo that we bought and rented out for 5 years then we moved in and have lived here for 2.5 yrs. and want to sell it this summer. We really won't get much above what we bought it for, unfortunately so there won't be much gain. Can we just use the 500,000 exclusion since we have been here for 2.5 yrs and do I even need to report the sale?
But this is more of a math question. I am wondering if anyone here decided to ignore the tax advantage and just keep the house for many years beyond the 5 years timeframe and IF that works out for them financially. Meaning rental + sell price makes up for the capital tax later on.
Would love to hear some stories.
p.s. Frankly we like to keep that house as our kid grew up in it and has tons of memories, plus beautiful backyard playarea. So emotionally, yes there is a component of that.
I'll assume that the landlording has gone well thus far.
How will you handle it when (eventually) it gets trashed by tenants (or deteriorates naturally by having a non-owner living there that doesn't have the same vested interest as an owner.)
only you pay the depreciation back eventually if they don't want to die with the property ...all those years of depreciation came back to haunt us when we no longer wanted to be landlords in retirement . in the end the depreciation was much ado about nuttin .
It's only a wash if his income tax rate is the same as the capital gains rate. With rental income, that is unlikely.
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