House sale tax question

May 4, 2009 4:26 PM

Rental house sale - I moved out of my house and started renting it Jan 2008. If I sell it soon, what are the tax ramifications?

I lived in this house as my primary residence from 1990 to Dec 2007. Rented it last year to my daughter and she's moving out to buy a house. If I sell it, how will it affect my taxes? Are there any websites that would help with the calculations or have some advice? Thanks for the help.

posted by mikedelic to work & money (4 answers total)

Did you consult IRS.gov?

To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The ownership and use periods need not be concurrent.

It looks like a sale would be treated as if you sold your primary residence. The one year rental is apparently irrelevant.

(IANACPA)
posted by Andy's Gross Wart at 4:36 PM on May 4, 2009

As long as you've lived in it for 2 of the last 5 years, you shouldn't pay any additional taxes - it would be just like selling your main residence. If you didn't meet that particular requirement, you could do a 1031 exchange to avoid taxes.
posted by Ostara at 6:14 PM on May 4, 2009

I thought that two-of-the-last-five-years rule changed in the recent past, although my quick search of IRS.gov didn't turn up the specifics. I recall something about taxes being prorated based on the percentage of time the house was the owner's principal residence versus the percent of time that it was rented out.

This would have changed in the last year, or two at the very most. Hopefully someone can clarify?
posted by Sublimity at 6:32 PM on May 4, 2009

Assuming you're in Australia, there is a grace period of seven years before capital gains tax is payable, if the property was your primary residence.
posted by bystander at 5:30 AM on May 5, 2009