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Years ago I read that we would have to pay capital gains tax on any profit made when we sold our house. And we could deduct certain improvements and expenses related to the house. So I have saved all my receipts toward that eventuality.
We bought a newer bigger house but kept our original home and have been renting it out for about 8 years. We intend to sell it in 2011 and I'm starting to organize my records for that.
Do I understand correctly that I can deduct improvements to the house from the profit we make on the sale, but not maintenance costs? If that is correct then I assume we can deduct improvements like adding ceiling fans, a covered patio, rain gutters and landscaping. How about mini-blinds and curtains?
We have had major expenses replacing the HVAC, repairing/replacing rotting wood, repainting and reroofing the house. Can any of that be deducted or is that maintenance?
Location: Stuck on the East Coast, hoping to head West
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Quote:
Originally Posted by Donn2390
move back into the house for two years and pay no taxes....
Actually, the IRS changed that law last year. If the now principal residence was previously a rental, you have to use a ratio to determine the capital gains exclusion. Don't have time to look it up at the IRS website, but here's a link to the article regarding the change
To the OP: IMO you really need a tax professional to help you out with this one. I suggest an enrolled agent or CPA who specializes in individual taxation.
You should have been deducting maintainance,repairs and other qualified expenses, including depreciation each year to offset the rental income.
What would be included as capital improvements is a different catagory.
Depreciation on the capital improvements and the building itself is handled differently.
From your questions it is obvious you need to go to a professional to assess your situation.
Thank you all for the feedback. I should have known it would be more complicated then I expected. I have been using an accountant to prepare our taxes since we began renting this property.
She has been deducting the appropriate costs and depreciating the property. I will discuss it with her further. We have owned the home for 28 years and rented it out only the last 8 years, so I have all of the receipts for improvements during that time. I was just trying to figure out how to organize it better.
Why are you asking us? I'd find a good accountant who understands this area thoroughly. Yeah, you'll pay some money in fees, but considering what you'll save in taxes and misery, it's well worth it.
Actually, the IRS changed that law last year. If the now principal residence was previously a rental, you have to use a ratio to determine the capital gains exclusion. Don't have time to look it up at the IRS website, but here's a link to the article regarding the change
To the OP: IMO you really need a tax professional to help you out with this one. I suggest an enrolled agent or CPA who specializes in individual taxation.
The depreciation is recaptured as well from when it was a rental..
even if you didnt bother taking it while it was a rental you will have to pay it back . its the biggest error un-skilled landlords make,. they have to pay back something they never took and werent aware of the tax law
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