Married clients have a house that was originally their primary residence (3 1/2 of the past 5 years). Rented it out the last year and a half. Sold house end of 2018. Depreciation needs to be recaptured. Can the $62,000 gain be wholly excluded from income? Or would a partial business use percentage be applied to so a slice of the gain would be taxable?
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Wow, it's been a long day and I didn't review the post before it went live. Let me try again: Would a small part of the gain be taxable because of the business use during part of the past 5 years? Just to be clear, when it was rented, the whole home was rented. -
Like you said, depreciation needs to be recaptured and taxed as ordinary income rest of the gain is not taxable"Dude, you are correct" Rapid RobertComment
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Thanks -- this is what I thought too. However, I can't seem to get the depreciation recapture in there without my software factoring a slice of business gain. Wanted to double check before straightening out my software default.Comment
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Have you read Publication 523? It has examples and worksheets relevant to your situation.Comment
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Yes, Maude, thank you -- I had worked through pub 523 and that's where I found that I can't exclude the entire gain simply because they lived in the house more than 2 of the past 5 years. This was new to me -- because they rented in the current year, and sold it immediately after renting, I do need to factor a business use portion and count that as taxable gain in addition to the depreciation recapture. This is what I trying to double check on.
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When it comes to the nonqualified use, ownership goes back to the entire time owned while nonqualified use goes back no further than 2009, due to the 2008 law change. https://scholarworks.sjsu.edu/cgi/vi...xt=contemp_taxComment
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