Question

Primary Residence rented for 2 years, moved back in and sold

Forum|Forum|6 years ago
February 10, 2020
1 reply
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I bought my Primary Residence in 1987. On 1-13-2016, I moved out and rented to a Co-worker, they

rented from me until 10-31-2018 (2 years 10 months)[$2942 in depreciation]. I moved back in; fixed it up and sold it 2-2-2019. I also used it as my home office back in tax years 2004-2007 ($983 Depreciation)

I've read that the 2 out of 5 years does not have to be consecutive and for me it was not.

I originally paid $52,000 for the house when I bought it with an ex-girlfriend; then I bought her

share of the house for an additional $27,500 (does that add to my basis?)

When I sold, I got 204,000 for the house. I'm single with no dependents

1. Will I still get the residential exclusion?

2. How/Where on my taxes do I re-capture the depreciation?

3. Will I need to pay capital gains on the amount that was depreciated?

4. Any additional explanations or help would be great.

5. Is any of the time considered "Non-Qualified" because I moved out for 2 yrs 10 months?

6. How and where do I enter this information correctly in TurboTax Home & Business Edition

I'm really confused on how all this works and could really used some help.

TurboTax Home & Biz Windows

Hal_Al

Employee

Q 1. Will I still get the residential exclusion?

A 1. Yes. You lived in it, and owned it, for the required 2 years out of the last 5.

Q 2. How/Where on my taxes do I re-capture the depreciation?

A 2. You will be asked to enter the total depreciation taken, in the home sale interview. Enter $3925 (2942 + 983)

Q. 3. Will I need to pay capital gains on the amount that was depreciated?

A. 3 Yes, it will be treated as a section 1250 gain; taxed as ordinary income with a 25% max. A portion of the capital gain attributable to the rental period will also be taxed at long term capital gains rates

Q. 4. Any additional explanations or help would be great.

A. 4. TurboTax (TT) handles this very smoothly with a simple interview for you.

Q. 5. Is any of the time considered "Non-Qualified" because I moved out for 2 yrs 10 months?

A 5. Yes. TT will ask you for the period (in days) of non qualified use.

Q 6. How and where do I enter this information correctly in TurboTax Home & Business Edition

A 6. Federal / Personal Income / Less Common Income / Sale of Home

Q 7. I originally paid $52,000 for the house when I bought it with an ex-girlfriend; then I bought her

share of the house for an additional $27,500 (does that add to my basis?)

A 7. Yes

G

guythatwalksthehillAuthor

On Question 5 do I put down 2 years and 10 months of "Non-Qualified" ? Most of that time is after

I lived there for 30 years ?

Turbotax says put "NO" if the time is after it was my Primary Residence

Question 7. Are you sure that I add the 27,500 to 52K and increase my basis? I'm reading conflicting

information about that item?

Hal_Al

Employee

" put "NO" if the time is after it was my Primary Residence" should read "after it was my Primary Residence for the last time". So, you need to answer yes. The gain attributable to that period is taxable.

"Are you sure that I add the 27,500 to 52K and increase my basis? I'm never sure of nothing, when it comes to taxes, but sure enough I would do it that way with a clear conscious. (see next paragraph for an exception).

If when you bought her share, you paid her less than her basis and less than fair market value (FMV), then your additional basis is her basis*. She is considered to have given you a gift of equity and the basis in a gift is the giver's basis.

*If your sale had resulted in a loss, there'd be another wrinkle to consider, FMV . But that doesn't apply in your case.