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I don't see where anyone answered your second question. Yes, you will need to report the sale because when you sell the house, the people doing the settlement (real estate attorney, title co., etc.) are required by law to report the amount that you sold the property for to the IRS. So the IRS will receive a form that you received the amount that you sold the house for, and you will have to declare it and provide deductions, if any.
A person need not report the sale of a primary residence if all of the gain can be excluded. Renting or home office use may affect whether all of the gain is excluded, as will the amount of the gain. Of course, they will need to report the sale if a 1099-S has been filed.
Wow, thank you for the additional information. We rented it out for 5.5 years first then we have now lived in it for 2.5 years. I'll need to check how to prorate this. We don't expect much gain at all but want to do this correctly. Purchased it for 100,000 and depreciated it and new appliances for a total of 21,000 bringing our basis down to 79,000. We only expect to sell for 100,000.
I can give you my capital gains tax experience: sold a Los Angeles rental house for $895,000 in 2005. Capital gains tax: roughly 35%. Sold another rental in 2012 (post-crash) for $655,000. Capital gains tax: roughly 35%. Am selling another rental currently asking $775,000. Projected capital gains tax 38.8%. Note that 3.8% difference. That's because in 2013 Congress passed a Medicare tax on all real estate sales that show a profit above $200,000 or something like that. So when repairs and commission is factored in my expenses for the sale will eat up roughly half of my take.
I can give you my capital gains tax experience: sold a Los Angeles rental house for $895,000 in 2005. Capital gains tax: roughly 35%. Sold another rental in 2012 (post-crash) for $655,000. Capital gains tax: roughly 35%. Am selling another rental currently asking $775,000. Projected capital gains tax 38.8%. Note that 3.8% difference. That's because in 2013 Congress passed a Medicare tax on all real estate sales that show a profit above $200,000 or something like that. So when repairs and commission is factored in my expenses for the sale will eat up roughly half of my take.
you have to be careful kicking the taxcan down the road unless you plan on dying .....
we delayed the taxes on a sale just 1 year and the capital gains rate jumped from 15% to 23.80% ..... it really hurt ......many times you are better off paying up while rates are low .
I'm trying to get out of the market, not stay in. Starker exchange is just trading your well-maintained home for someone else's money pit.
I can hardly get any old folks to sell their homes.
Most of the old folks I encounter here want to keep their 3 homes and pass them on to the kids, who get them nearly tax free with their stepped up tax basis.
Or they rely on the rental income.
no longer true ...the rules changed when a property is put in to service first as a non primary ... the 2 out of 5 years is only when it was a primary first then a rental ...
they stopped allowing people to take rentals and vacation homes they had and moving in and making it a primary and getting the full exclusion in 2007 or 2008.
they started prorating it ..
I took as it was their primary home before they rented it. They said their kid grew up there. I think the OP needs to clarify things to get a straight answer but your input is also helpful if it was rented first.
if it was their primary first then they have to sell within a 5 year period if it was made a rental
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