Selling property converted from primary to rental

Forum|Forum|3 years ago
February 3, 2023
1 reply
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I purchased a property in 2021 as a primary residence for $500k. During 2022 I moved for a job and decided to rent the property instead of selling. At the time of conversion the property was worth ~$525k and I took depreciation for 2022 based on that amount. If I were to sell the property in 2023, what would the tax implications be? How is the “gain” from $500 to $525 treated, and then the depreciation factored in?

AmyC

Employee

Gain is sales price -basis + depreciation unless you made improvements to add to the basis/ subtract from the gain.

Example:

Sell for $530,000

Depreciation for 2022 and 2023 to sale date of $30,000

Basis is $500,000 - 30,000 = $470,000

Sale price minus basis is a gain of $60,000.

It is a long term capital gain on sch D. Your income determines the tax rate based on the rates for the year you sell, currently capped at 20% for this scenario.

Topic No. 409 Capital Gains and Losses - IRS

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