TAXATION Selling home purchased 6 years ago after a 2 year lease (sales, real estate)

[puzzled2012]

Hello everyone,

Firs of all, thanks in advance for your interest and support with this post.

Here is my situation. My husband and I purchased a house in NJ 6 years ago, at the peak of the housing bubble.

Our Job stability weakened in the spring of 2011 and we tried to sell the house that summer '11 to relocate for new jobs in Pennsylvania. We were not able to sell, for which we tried the next "best option" at that moment which was to lease the house. We got a tenant who signed a 2 year lease with us, due to expire on August 2013.

Now, I understand that capital gains in investment property is taxed at a 25% tax rate. I also read in another website that homeowners that sell within five years of purchase and have used the property as primary residency, are not subject to that capital gains tax. Can someone educate me/ clarify if indeed this would be considered an investment property in our case???? are there any other caveats/ exceptions I could benefit from??

If this is indeed the tax rate that we would be subject to, over the course of these past 6 years ( 7 by then) we would have been doing nothing more than to work hard to keep that investment somewhat afloat, working day and nights lonnng hours for nothing more than to break even! I really need to know about this to make my next decision about trying to refinance now and/or remove PMI in order to at least get some money back on our investment from whatever savings we can realize between 12-24 months from now.

Thanks, I know it's a lot of info, I hope I articulated this info well for all of you.

Looking forward to your comments!

Regards.

[manderly6]

If you bought at the peak of the bubble, do you actually have a gain?

[BobKovacs]

Originally Posted by manderly6

If you bought at the peak of the bubble, do you actually have a gain?

Exactly. And given the beating most people are taking on home sales lately, I'd be thrilled to "break even" on the sale of a house that was bought at the peak.

[nybbler]

Sale of Residence - Real Estate Tax Tips

Though if you have a loss, you probably DON'T want the home to be considered your main home.