Hello and thank you for using Just Answer,The rule for exclusion is on your personal use of the property (you are correct on that). Your basis is the fair market value when you inherited the property and as you have been renting the property for profit you will need to recapture depreciation if you do sale for more than your basis. Recapture means you will pay regular tax on the amount of the depreciation you have claimed.The 1031 would be your safe harbor on capital gains tax if you can stay within the timeframes needed.
I understand about your feelings on using the property and please accept my condolences.
Okay, so I plan on leaving the Bay Area within the next year or so.
the thing is, if I move into the property, I will need to move before 2 years
probably at most a year
And you would still need to recapture depreciation (if you have a gain).
it was depreciated while in probate by the estate
and personally for the year that I held it
That amount will not be so much and it is your depreciation that matters (while you owned it)
I think it was about $8K
so do I have to pay $8K back if I sell it
if I don't stay in the property for 2 years
No but the $8k would be added to your income as ordinary
how would I know the capital gains rate?
apparently it is worth about $450K now
well I can't really tell, between $350K and $450K
The rate is dependent on your income total (20% most likely)
Not if you are going to have that high of a gain and guesstimating on income
so if I live in it a year
does that help?
or is it 2 years or nothing
If you lived in it a year and had to move for job or medical or some other unforseen reason you could take a partial exclusion
such as finding a job in another area?
or would i have to lose my job
trying to google around for exclusiosn
Finding a job would be OK
You do not have to loose the one you have, you could just be transferred
in my case I am looking to be with my fiance in Los Angeles
so I'm looking for jobs out of the area
That would be reason then
for a partial
sorry for teh follow up questions, will add bonus
Better we cover everything then you have to wonder
so can I maintain two residences, an apartment by my office and the house?
I've thought about renting out the rooms and having all my mail go there
You can have 2 but only one can be your main home
That is the one you spend most of your nights in
but maintaining my apartment near the office
Where your mail goes to and where you vote
The apartment can be 2nd home
yes, all of my mail would go there
utilities are in my name
drivers license is in my name
Those are good things
but I don't need a 4 bedroom house
so I was thinking of renting the rooms, keeping a room for myself
but keeping my apartment by my office
You can rent partial
You can also still use the exclusion on renting a portion of the home
so you're saying I can still rent par tof the house
but still claim it as a primary residence
There is a diffderence in renting out the total house or just a portion
to what you just stated
there are two stories, with separate keys
my family's belongings are all in teh second story
have been since he died
only the downstairs has been rented out
So the half upstairs would become your residence
If the downstairs is a totally separate residence then you would need to split everything (like a duplex) your exclusion would be just to the half you lived in
it doesn't have its own bathroom or utilities
Ok then it is all your residence (should you make it so) and you would claim the rent on the portion you rent out and then your exclusion would be allowed on the sale (partial if what we chatted about already applies)
someone told me about 1031 exchanges
but the problem with that is I would have to purchase the other property within 45 days
You would have to designate in 45
I"m planning on selling the property and buying several
using the proceeds as the downpayments
so I gather the problem is that I'd have to identify all of them within the 45 day period
Then you may want to just sale and take your lump. If you time the sale right you may have deductions and depreciation to claim all in the same year.
Let me get a great basic on 1031
The above covers the 1031 in basic
thank you, Robin
you've been super helpful
You are most welcome
have a great day!