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Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
The form IT-2663 is NOT required when you have a primary residence
See the instructions to the form
The Form IT-2663 is only required for non-personal residence homes
Cool, thanks! The issue might be that I left NY 2.5 years ago to live in CA and have rented out rooms in the house for the past seven years. I've also claimed depreciation as part of my taxes when I rented out rooms in the house. I lived there as my primary residence, but it is not currently my primary residence. Also, my wife isn't an official owner of the house, since I bought it before we met. Will this effect any of the paperwork?
Oh so it wasn't 100% used as your principal residence. You will need to follow the instructions on a partial residence then
You will use the worksheet on page 2
When filling out the worksheet, you ONLY fill in the information for the part of your house that was NOT your primary residence
so the gain attributed to the period that it was a rental
I would highly recommend that you get a NY tax preparer to assist you with this, as you will need to calculate what portion is attributable to the period that it was a home, vs rental
Ah. I'll have to find one. That'll be tricky. It's a four-bedroom house, and I lived in half the house and rented the other half out for the first five years, and then rented the whole house out for two years, and it's been vacant another six months.
Yes, you should have assistance with this because it will be VERY tricky
Will that effect the 250-500K exemption?
No, not for the portion that is attributed to your primary residence
you will have to pay tax on the depreciation recapture though so it's not like there will be zero tax on this
But if the home improvements totaled more than the depreciation, will they cancel out?
If there is a loss on the sale then there is no tax
Your accountant would be able to lay it all out there for you. It sounds like you have a tricky situation
But, if there's gain you will have depreciation recapture
but on the gain that is not depreciation recapture, then that will be excluded
I guess what I'm wondering is, if I have a 500K exemption, but I rented the house out 50% of the time, would it only be a 250K deduction?
That's good news.
The exemption applies to the entire property, but you will still have depreciation recapture
Yep, I've totaled all that up from my past eight years of taxes. So far it looks like my closing costs run about 85K, my improvements are about 68K, and my depreciation is about 56K, so I think I should be okay. The house is selling at a 425K profit, so I should be under the line.
Is there anything else that I can assist you with today?
I think so. Just one more thing, I couldn't find on the IT-2663 where it says that it's not needed if the sale is for a primary residence. Where does it say that?
It's on the instructions
Which is a separate file
Is there anything else you need assistance with today
Ah, sorry. I saw those instructions, but I couldn't find any reference to "primary" when I searched it.
It's called principal residence
in the instructions
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I think that clears up my questions.
Thanks a lot!
You're certainly welcome
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