Quote:
Originally Posted by Run Silent
This is mostly true. The LTCG exemption is actually quite a bit higher than those numbers, since you can also subtract your full cost basis in the property from the sales price. Your cost basis is calculated by starting with the price you paid for the home, and then adding purchase expenses (e.g., closing costs, title insurance, and any settlement fees).
To this figure, you can add the cost of any additions and improvements you made that had a useful life of over one year. Finally, add your selling costs, like real estate agent commissions and attorney fees, as well as any transfer taxes you incurred.
This is not true. You will not have to pay an taxes on depreciation you did not elect in prior years. I'm not sure where you got this information. Here are the particulars if interested. I am a certified public accountant. While I agree that depreciation recapture is going to be assessed by the taxing authority at time of sale, the IRS provides a lookback clause in that you can amend previous returns to offset the recapture provisions in order to not have to pay taxes you don't owe. So basically, you pay the taxes and then get them refunded via amended returns. Not a smart move, but you won't be taxed on un-taken depreciation.
https://www.irs.gov/pub/irs-pdf/p527.pdf
https://www.irs.gov/pub/irs-pdf/p946.pdf |
Thanks for the clarifications. I did know about the first part. That is why I stated you would be subject to Cap Gains on the
proceeds of the sale. I guess I did gloss over that the proceeds of the sale do not equal the sale price but rather the amount of money "gained" during your ownership of the property.
As for the second point, I do see your point. Basically, if you do not claim the depreciation you are entitled to during your period of ownership/rental you will need to file amended returns for those years when you prepare your taxes in the year following the sale. As you said, not advisable.
Bottom line, hire a CPA and get their advice.
