I have been thinking about a strategy to help with the first 5 to 10 years of retirement.
We currently own our primary residence (we purchased it 18 years ago) and a vacation rental (we purchased it 10 years ago). My plan/idea is when I reach the age of 55 is to sell my personal home and transfer the property taxes to a beach area home within a similar price range (we live in CA).
We would live in the new to us beach city home for 5 years then retire and move into our vacation home in AZ. Turning our primary residence into a rental and our vacation rental into our primary residence.
This is where I am a little confused. I am trying to calculate the future depreciation of the beach city home's depreciation value once I start renting it out. The idea was is to keep the property tax basis the same (similar to my current primary home taxes since CA limits property tax increases to 2% per year) but on the other hand increase the tax write-off due to a higher purchase amount.
My current residence was purchased for around $400,000 and is currently worth about $850,000. Let's say we sell it for $900,000 in a couple years and we purchase a small home in a beach city for around $900,000. We live there for 5 years and the home is now worth $1,000,000. What do we use for the depreciation value once we place the home in service as a rental? Do we use the original purchase price minus the land value ($900,000 - land value $200,000 = $700,000) or do we use the value once the property is placed in service five years after purchase ($1,000,000 - land value $200,000 = $800,000). Also does the transferred property tax basis change any of these calculations?
Thanks...
We currently own our primary residence (we purchased it 18 years ago) and a vacation rental (we purchased it 10 years ago). My plan/idea is when I reach the age of 55 is to sell my personal home and transfer the property taxes to a beach area home within a similar price range (we live in CA).
We would live in the new to us beach city home for 5 years then retire and move into our vacation home in AZ. Turning our primary residence into a rental and our vacation rental into our primary residence.
This is where I am a little confused. I am trying to calculate the future depreciation of the beach city home's depreciation value once I start renting it out. The idea was is to keep the property tax basis the same (similar to my current primary home taxes since CA limits property tax increases to 2% per year) but on the other hand increase the tax write-off due to a higher purchase amount.
My current residence was purchased for around $400,000 and is currently worth about $850,000. Let's say we sell it for $900,000 in a couple years and we purchase a small home in a beach city for around $900,000. We live there for 5 years and the home is now worth $1,000,000. What do we use for the depreciation value once we place the home in service as a rental? Do we use the original purchase price minus the land value ($900,000 - land value $200,000 = $700,000) or do we use the value once the property is placed in service five years after purchase ($1,000,000 - land value $200,000 = $800,000). Also does the transferred property tax basis change any of these calculations?
Thanks...