? on Renting out condo/ Capital gains (rental, pay, tax, property)

[ra1007]

Any advice, greatly appreciated.

Thinking we should rent out manhattan condo and high tail it south for a while.

1. i assume i will continue to pay nyc taxes due to the property and will report the rental income as 'income'?

2. how long can i keep the unit rented and thus possibly selling it? capital gains will be steep at some point right?

3. do people move back into their places to avoid the CGains?

thanks much to all.

[khuntrevor]

Generally, if you lived in it for 2 of the past five years, you are ok. There are some exceptions based on hardship, that will ease the pain of selling within the first two years. TurboTax handles this well.

[ra1007]

What will the pain be, worst case scenario? thanks lol

i've lived here for 8 years, would rent it out for 2.5 to 3 and then sell. wdyt? bad and dumb or is there a smarter solution? TIA

[rjrcm]

You should discuss with a CPA. No one can tell you what the pain will be as it will depend on how much you can sell for versus your cost basis. Currently capital gain tax is limited to 15%, but that will likely rise in the next few years. It's supposed to go to 20% in 2013 unless new legislation is passed. You should get some income offset from rental expense deductions, but will also need to factor in depreciation recapture when you sell.

[rjrcm]

Again, check with your CPA, but if you sell within 3 years, you may still qualify for a capital gains exemption as you will still have lived in the home 2yrs out of the last 5. You will have to offset a portion of the exemption based on depreciation you might claim as a rental. See:

Publication 523 (2010), Selling Your Home

[ra1007]

Thank you thank you