|
|
|
Selling a Converted Principal
Residence
Part of the Gain From a Period of Rental Use is Now Taxed
Under prior tax law, if you sold a home that had been
owned and used as a principal residence for two out of the past five
years, you could exclude up to $250,000 ($500,000 for joint filers) of the
gain. This means you could have bought a rental home or rental
property and used it as such for years. As long as you moved into it and
lived there for two years prior to a sale, you could exclude gain on it
(except for depreciation).
Under the Housing Assistance Act of 2008, as of January 1, 2009, the gain
allocated to this period of nonqualified use is no longer be excludable.
Hence, if you have property used as a second home (e.g., vacation home) or
in a rental activity that you some day plan on converting to your
principal residence, you may be affected by this new provision.
Basically, any gain on the property attributable to rental period after
January 1, 2009 will now be taxed. These new rules are very complex, so
it’s important to talk to your tax professional before converting or
selling. It could make a big difference on your tax return.
|
