What if i changed my rental property into second residential home, what are the tax implications when i sale
If you convert your rental property into a second home and later sell it, the tax implications can be complex. Here's a general overview of what you might expect: 1. **Capital Gains Tax**: When you sell a property that has been used for both rental and personal purposes, you may be subject to capital gains tax on the profit from the sale. The gain is calculated as the difference between the adjusted basis in the property (usually the purchase price plus improvements, minus depreciation) and the selling price. 2. **Primary Residence Exclusion**: Normally, if you sell your primary residence, you can exclude up to $250,000 of capital gains from your income ($500,000 for married couples filing jointly) if you have owned and used the home as your primary residence for at least two out of the five years prior to the sale. However, since this is a second home, this exclusion would not apply unless you convert the second home to your primary residence for the required period. 3. **Depreciation Recapture**: For the years the property was used as a rental, you likely claimed depreciation deductions. Upon sale, you must "recapture" that depreciation and pay a 25% recapture tax on the amount of depreciation claimed. 4. **Conversion to Personal Use**: If you convert a rental property to a personal residence, the period of rental use may affect your tax basis and the amount of capital gains subject to tax. The IRS looks at the non-qualified use
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