Tax Implications w/ selling rental property that was previously primary residence

Tax, SDIRAs & Cost Segregation
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Tax Implications w/ selling rental property that was previously primary residence

Chris Burke
Member since 2023 · 10 posts · 13 votes

I am looking for some tax advice regarding the potential sale of rental property. 

Trying to understand what a potential tax bill may look like. 

Property was previously our primary residence, having lived there for a few years, and started renting it out beginning October 2022. Looking to sell within the next few months. 

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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
2y

You will likely need to report as income the depreciation taken from October 2022 to the time of sale.

[email protected]917-280-8544
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  • Christian Block
    Accountant · Redmond, WA · Member since 2023 · 32 posts · 12 votes
    2y

    I think the first thing you want to check is Section 121 gain exclusion eligibility.  Go through the five part test to see if you meet the requirements.  This should give you a good idea of the amount of gain (if any) you will realize.

    https://www.irs.gov/publications/p523

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  • Chris Burke
    OP
    Member since 2023 · 10 posts · 13 votes
    2y

    Thank you! It looks like we meet all the qualifications but will need to factor in recaptured depreciation.   

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    You will likely need to report as income the depreciation taken from October 2022 to the time of sale.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    2y

    @Chris Burke based on what you say you are eligible for Section 121 gain exclusion, but since this was a renal property you will have to pay taxes on Depreciation Repture unless you consider 1031 exchange tax strategy. 

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    *This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

    [email protected]628-241-0888
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  • Tyler Fontaine
    Property Manager · Member since 2022 · 196 posts · 125 votes
    2y

    Best thing to do is get your books in order, get your taxes together, and then sit down with a real estate friendly CPA who can help you with everything. They can see things you missed or were ignorant to, they can plan/strategize the best way to make the exit, etc...

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