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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.
It really depends on the amount of capital gain you're talking about. Generally, I would say that you should keep the memories but sell the house. If you really want to be a landlord, you would most likely be better off selling the house, taking your profit tax-free, and then buying another house to use as a rental. Being a landlord isn't all that it's cracked up to be.
If you are in the 15% tax bracket the capital gains rate is zero. You might be in a position in the future (if the tax law stays the same) to manipulate your income down enough in the year you sell to pay no capital gains tax.
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
If you are in the 15% tax bracket the capital gains rate is zero. You might be in a position in the future (if the tax law stays the same) to manipulate your income down enough in the year you sell to pay no capital gains tax.
Not sure it works that way. The profit from the sale is itself considered income.
The question is did your profit exceed the 500000 exclusion you and your wife are allowed? Only then is it worth considering the tax you would pay.
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
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.
If you've lived there only 2 out of six years owned, you will pay on 4 years of rental income. You'll have to add back the depreciation, etc and then add the income into your income. Depending on your overall income, you'll pay plenty. Go to an accountant before selling and have them do the math. It takes 5 years occupancy to turn a rental back into a main residence. It takes 2 only if a house was never a rental.
If you've lived there only 2 out of six years owned, you will pay on 4 years of rental income. You'll have to add back the depreciation, etc and then add the income into your income. Depending on your overall income, you'll pay plenty. Go to an accountant before selling and have them do the math. It takes 5 years occupancy to turn a rental back into a main residence. It takes 2 only if a house was never a rental.
2 out of 6 years can lose the entire exclusion ... it is a rolling 5 year period and you need to sell within 5 years having lived in it at least 2 as a primary
2 out of 6 years can lose the entire exclusion ... it is a rolling 5 year period and you need to sell within 5 years having lived in it at least 2 as a primary
I was thinking the same thing. Where did they come up with 6 years?
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