Capital Gains on a Rental? (CPA's please chime in!)

[Doug Vigliano]

So I bought a house in June 2015 in Orlando, FL 

I currently have it rented out with an option to purchase, they tenant-buyers put down a fairly large option fee and are self-employed, the deal should close in 2019

I have since moved to Texas and am renting a house.  Since I didn't buy a new house, this is the only "mortgage" on my credit.  

My question is when it closes, will I have to pay capital gains since this is technically my primary residence? 

I guess my question is what qualifies as a primary residence? Just because I've moved if I don't own anything else, does that qualify?

[Linda Weygant]

Can you clarify your question?

Was this property ever your primary?  Like, back in June 2015?  Or did you buy it with the intent to rent it?

If it was your primary, then you will not pay capital gain taxes on it if it was your primary residence in 2 of the prior 5 years of the date title transfers out of your name.  Doesn't sound like you're going to qualify for this since we are not yet 2 full years from that date, but perhaps you're close.

You will have to pay Depreciation Recapture though, so be prepared for that.

If this was never your primary, then you will be paying Capital Gains and Depreciation Recapture.

Note that just because this is your only mortgage, that does not mean that this is your primary.  Primary residence has nothing to do with how many mortgage you have.