Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 2
Registered: ‎03-11-2016
Accepted Solution

Selling home - need help/advice

[ Edited ]

Scenario

Location: Texas (Dallas County)

Selling my condo that I have owned for the last 13 years. 

It has been rented for the past 6 years

 

Some stats

Bought for $116,000

Selling for $149,900

 

Question

What do i need to consider for taxes when selling the condo? Will this be treated as capital gains and i need to keep a portion of the profits to use for next years tax return (that i use H&R Block for)?

 

Any advice would be great

 

Alan

Trusted Council Member
Posts: 6,191
Registered: ‎02-23-2016

Re: Selling home - need help/advice

Hi Alan,

 

Welcome to the H&R Block community.

 

Yes, you'll want to save at least 15% of the gain on the sale for taxes.  I would save at least $5,000 going based on a $33,000 gain (your selling price less your basis).

 

Since you rented the condo for the last six years you will not meet the requirements to exclude the first $250,000 from income, so your entire gain will be taxable for the capital gains tax.

 

If your income level, including the $33,000 gain, is in the 33% tax bracket or higher then you'll want to save 20% of the gain instead of 15%.

 

There is no state income tax for Texas, but if you permanently reside in a state that has an income tax you should also take that into account and save an extra 5% or so of that gain for the state.  In states that have an income tax all of your income is taxable no matter where the income comes from.

 

Your gain may be less if you made any improvements, such as new appliances or a new bathroom, to the condo over its life.  Improvements increase your basis and lower your capital gain.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Pioneer
Posts: 1
Registered: ‎04-25-2018

Re: Selling home - need help/advice

Sorry, it won't let me start a new thread.
Situation: owned home for 10 yrs. Selling it. I'm military an recieved orders to new mexico. My now Ex wife then wife moved out a yr and a half ago. I rented the home Dec of 2016. While we were married after I PCSd I bought a travel trailer and maintained my home in Florida as my primary residence to ride my assignment out. I was paying for two households basically. Wife wasnt working. We just divorced last Sep.

I originally paid 170k for the hole. I put 12k in upgrades to the house. I'm going to sell it for 215k.

How much tax should I expect to pay.
Highlighted
Council Member
Posts: 548
Registered: ‎04-06-2016

Re: Selling home - need help/advice

I don't know all of the ins and outs of selling rental property, but I do know the following:

1) You'll need to make sure you adjust your basis by whatever depreciation you were eligible to take during the period that you rented the property, even if you didn't claim the depreciation on your tax return for the years it was being rented.  This will decrease your basis and likely increase the tax you owe.

2) There are special rules for military when it comes to being eligible for the capital gain exclusion. (You can qualify for a period of suspension of the 5-yr test period.)  If you can qualify for the capital gain exclusion, given the info you've provided you wouldn't owe any tax on the capital gain.

 

See Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf for more info. 

 

Karen