Transition Investment Property to Homestead - Tax Advantages

[njonge01]

Hi, I own a couple of investment properties that are rented out. One is depreciated 5 years and the other about 11. I could live in either one of them.

I haven't done my research yet. But, I will investigate to find if I can live in one of those properties for atleast 2 years and then sell it as a homestead... feeling none of the capital gains pain that comes from selling a depreciated investment property.

Any thoughts Thanks!!

 

[HpRyder]

You missed the boat, the rules changed in 01/2009. Research 1031 exchanges.

 

[njonge01]

You missed the boat, the rules changed in 01/2009. Research 1031 exchanges.

Bummer. I'm familiar with the 1031 exchanges and do need to learn more. Also, I need to get a feel for how I would fare just taking the capital gains hit. The last time I'd spoken with anyone about the transaction I proposed was in 2006. Sounds like the game has changed.

 

[calmloki]

What HpRyder said.

An example I found:

"You have to allocate the capital gain between the rental use and
personal use. Only the capital gain due to personal use is tax-free
(unless it is more than 500k).

Say you bought the house for $100,000. 10 years depreciation would be
about $36,300. You sell it in 2012 for $1,000,000. So 2 years
qualified use, 10 non-qualifed. So of the 900k capital gain, 2/12 or
$150,000 is qualified. 750,000 is not qualified. You have to
recapture your depreciation, so at the end must pay capital gain on
$786,300. At least that's how I think the example is".