Selling rental property. Have some questions
February 5, 2013 4:52 PM Subscribe
I am selling a rental house and I have some questions about taxes etc. I know YANMCPA, but if you could point me to a place I can read some clear information, I would appreciate it.
I have owned this house since 2000. I lived there through 2008 and then rented it to my daughter from Jan 2009 until May 2012. It has been vacant and on the market since then and looks like its going to sell shortly. My questions are regarding figuring the capital gains. If I net 30K after all my expenses, what would the taxes be? How are the improvements I have done over the years factored in? Should I use my HELOC to pay off some bills to make my net proceeds smaller? The IRS website was not too helpful. Is there someplace else I can go to find clear explanations that won't make my head hurt? Thank you.
I have owned this house since 2000. I lived there through 2008 and then rented it to my daughter from Jan 2009 until May 2012. It has been vacant and on the market since then and looks like its going to sell shortly. My questions are regarding figuring the capital gains. If I net 30K after all my expenses, what would the taxes be? How are the improvements I have done over the years factored in? Should I use my HELOC to pay off some bills to make my net proceeds smaller? The IRS website was not too helpful. Is there someplace else I can go to find clear explanations that won't make my head hurt? Thank you.
"Is there someplace else I can go to find clear explanations that won't make my head hurt?". Yes, a CPA. So much depends on the nature of repairs/improvements, if you used depreciation schedules, fair value of rental etc. It would be best to consult a CPA unless you want to do considerable reading--it depends very much on how you expensed your items in the past. Good Luck
posted by rmhsinc at 12:28 AM on February 6, 2013
posted by rmhsinc at 12:28 AM on February 6, 2013
After you sell the property, take the final HUD-1 (document explaining all the financial aspects of the transaction) from the sale (and the one from your initial purchase), to a CPA. Also your tax returns since then.
He will also want to know (and see records of) any money you spent on upgrades/repairs to the property over the years (these will increase your basis, thus decreasing the amount of taxes you will have to pay).
But yeah, this is beyond the scope of MeFi, and beyond TurboTax too probably.
posted by lohmannn at 6:13 AM on February 6, 2013
He will also want to know (and see records of) any money you spent on upgrades/repairs to the property over the years (these will increase your basis, thus decreasing the amount of taxes you will have to pay).
But yeah, this is beyond the scope of MeFi, and beyond TurboTax too probably.
posted by lohmannn at 6:13 AM on February 6, 2013
For U.S. tax questions, start with the IRS. Publication 523: Selling Your Home And yes, get a CPA. It's probably not beyond TurboTax if you are familiar with the basic issues and are willing to spend quite a bit of time and effort, but that doesn't sound like you.
If you are moderate income (taxable income below $72,500 for married couples, including the gains from the house), your capital gains are not taxed. But you're probably in the 20 percent capital gains bracket, so you will owe somewhere in the neighborhood of $6,000 - more if you depreciated the property earlier, less if you had undeducted expenses.
posted by Mr.Know-it-some at 7:41 AM on February 6, 2013
If you are moderate income (taxable income below $72,500 for married couples, including the gains from the house), your capital gains are not taxed. But you're probably in the 20 percent capital gains bracket, so you will owe somewhere in the neighborhood of $6,000 - more if you depreciated the property earlier, less if you had undeducted expenses.
posted by Mr.Know-it-some at 7:41 AM on February 6, 2013
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As background in advance of your consultation with a CPA, of course. This type of thing needs professional advice.
posted by yclipse at 7:10 PM on February 5, 2013