Do I turn home into rental property

[Todd Moss]

Looking for advisor possibly to work with on my situation. I plan to move to Berkeley from San Francisco and my home has appreciated, probably close to 400k. I can no longer 1031 a residential asset, so I am looking at renting in Berkeley and turning my home into a rental property. I think I can charge close to 5k per month. My numbers show that after loss of mortgage deductions and adding in taxes on the income my NOI will be close to zero. Maybe I missed something, happy to share details if anyone interested. Where I do make out is appreciation if I sell and someone else is paying my mortgage off. If I sell I take a hit because of taxes so long term was thinking figure out a way to either leave as is or find a property to 1031 to that has better upside and cash flow.

[Tony Kim]

Originally posted by @Todd Moss:

@Jim Goebel thanks for info. My research about the new tax code no longer permits 1031 for a personal residence. If i convert it to rental property then I can later 1031 it to a like kind rental.

So based on this post, it appears you are trying to avoid capital gains taxes associated with the $150K increase in excess of the $250K exemption? If your house has increased in value around 400K and you are in the bay area, I'm guessing your house is well into the 7 figure range. If you deduct closing costs of around 80K, then you're left with around 70K in gains. Have you not made 70K in capital improvements during the time you lived in your home?  Or are you already including cost basis adjustments from capital improvements in your 400k figure? Also, I would MUCH RATHER be liable for the 150K gains than have to resort to converting to a rental and attempting to 1031 later on down the line. Remember, the 1031 only defers capital gains...whereas the primary residence exemption permanently ELIMINATES the capital gain liability. Once you convert to a rental, you've lost the 250K exemption, unless you move back into the property....at which time you'll be able to lower your tax liability slowly, but never eliminate it.

Also, I guess it goes without saying that you are not married?