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Income tax on rental property
My home is paid for and I lived in it for 26 months. I've now moved out but don't want to sell it as the market is so low that I would take a substantial loss. I may rent it for the next 12-18 months to cover the cost of its maintenance/taxes etc. I won't be able to try and sell it during that time because rental will be through a contracted lease to the tenant.
After that time, if I get it sold prior to 5 years from my date of purchase, am I required to report the sale of the house as income? I don't understand if it will be considered as rental property then since I won't have been residing there at the time of the sale. |
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NOT if you are actively trying to sell the house during the rental period and are renting it ONLY to help offset the costs of maintain the home and paying the mortgage. You need to NOT claim depreciation on the Schedule E.
If you sell it in the next two years or so, you still qualify to EXCLUDE the sale from your tax return. If you go beyond the exclusion period, you will need to amend your 2009, 2010 and 2011 tax returns to claim the depreciation you did not claim. Because you MUST factor in the depreciation in determining the basis of the house whether you claimed the depreciation or not. |
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