Housing residency question

[Mwsinron]

A person I know had a question regarding a house that they used for vacation. Currently they rent because of their job location and use the house throughout the year for vacation. If they were to sell it they would not get the 500000 housing deduction? I'm making sure I gave them the right answer

 

[nnkrealtor]

If it has been their primary residence for 2 out of the last 5 years (dont have to be consecutive years) then yes they would qualify for the break. If not than no they wouldn't.

 

[Mwsinron]

Thanks, just wanted to make sure.

 

[Martha]

Yes they get the $500,000 exclusion, but to the extent they took (or should have taken) depreciation on the property while it was rented, they will have to pay a recapture tax on that depreciation. Probably not a big bill in this case.

 

[Mwsinron]

Well they do not rent the property out. They did not want the hassle of it. If Im understanding you correctly Martha. They are renting an apartment while their house is too far away from their jobs.

 

[Martha]

Sorry. I misunderstood. They are good to go with the exclusion.