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Old 12-18-2008, 06:47 AM   #21
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You learn something new everyday. Sometimes things that you don't want to learn. I never knew this change was even on the books. Thanks, Calmloki for the reference. From FMF an overview (if you disregard some of the Soapbox stuff).
Free Money Finance: Owners of Second Homes: Beware of New Tax Laws
Owners of Second Homes: Beware of New Tax Laws
>>>The new law eliminates the capital gains exclusion, prorated on the amount of time a home was not your primary residence. After January 1, every day you aren't living in a home starts adding to the percentage of capital gains tax you will ultimately be obliged to pay.

If I were planning to buy a second home to retire to, and they changed the laws like this and gave only 6 months to sell the first house to avoid the cap gains, boy I would be ticked. I agree that this change can only hurt the housing market.
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Old 12-18-2008, 08:13 AM   #22
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Quote:
Originally Posted by Nords View Post
You'll want to have an asset-allocation plan for where you're going to put the sales proceeds... after paying those righteous taxes, of course.

IIRC the sale of a home after you've lived in it for two years will not relieve you of the burden of paying depreciation recapture for the rental years. And even if you haven't been writing off the depreciation, the IRS assumes that you have and will expect the 25% payment anyway. And then there's AMT.

When we did the math on the cost of moving into a house for two years (including packing, unpacking, and packing/unpacking again) the money wasn't worth it. But I may be a bit jaundiced about moving after a military career full of it.

After 19 years of ownership, only eight of it in residence, we've spent the last 18 months sprucing our rental home up for sale. The plan is to sell it whenever the tenants leave, although we're still waiting for them to make an offer. But the prices around here, and especially in that neighborhood, have held up pretty well.
Is that 25% of the total amount of depreciation claimed over the years the property was rented?

Mike
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Old 12-18-2008, 08:41 AM   #23
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I am not an accountant, that said, you'll repay ALL the deprieciation tax benefit.

Depreciation is not a tax benefit.
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Old 12-19-2008, 06:05 PM   #24
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Is that 25% of the total amount of depreciation claimed over the years the property was rented?
To be technical, it's 25% of the total amount of depreciation that the IRS expects you to have claimed over the years the property was rented. If you improperly claim depreciation then you lose even more.

The good news is that you only have to claim depreciation on the house and its replaced contents (like carpeting). You don't depreciate the land or repairs.
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Old 12-19-2008, 06:54 PM   #25
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To be technical, it's 25% of the total amount of depreciation that the IRS expects you to have claimed over the years the property was rented. If you improperly claim depreciation then you lose even more.

The good news is that you only have to claim depreciation on the house and its replaced contents (like carpeting). You don't depreciate the land or repairs.
Good point Nords. This combined with planned changes to capital gains calculations make holding rental proterties even less attractive. It's sad to see given the sad state of the market for real property.
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