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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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If I roll the profits of my rental house sale into another

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If I roll the profits of my rental house sale into another property will I have to pay capital gains tax on the sale of that house. I lived in that house for 20 years before renting it out for the past 3 years.
Thanks for choosing! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

If you lived in the home for a full 2 of the last 5 years, you can exclude 250,000 dollars of gain from income. However, you will end up paying depreciation recapture on the property depreciation during the 3 year rental period.

In order to postpone the entire gain (make it not-taxable in the year of sale) you would need to acquire a new rental property that costs as much or more than the sales proceeds of the rental property that you sell. If the new rental is less than the sales proceeds of the property you are selling, there will be a portion of the sale that will be taxable in the current year.

For a 1031 exchange to work, you need to retain a local tax professional (CPA or enrolled agent) for help planning the transaction. If the transaction isn't properly planned out before the sale, the 1031 exchange will most like fail to meet IRS requirements and the entire gain would be taxable in the current year.

If there are additional questions or concerns, please reply to my answer so that I may assist you further. If this answers your question, please rate my performance between OK and Excellent so that I may receive credit for my answer. Thanks for your business.
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Customer: replied 3 years ago.

I started my rental 7/2010 . Am I to late if my escrow closes 8/2013. I lived in the house starting 8/1990.

Was the home under contract by July?

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