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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22636
Experience:  Taxes, Immigration, Labor Relations
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Weve moved into a home weve owned for several years as income

Resolved Question:

We've moved into a home we've owned for several years as income property and held as a rental and made it our primary residence. We know that on the sale of the property the accumulated depreciation expense over it's life as a rental must be declared as taxable income. Our question is can we declare the added income in a tax year prior to the sale?
Submitted: 8 months ago.
Category: Tax
Expert:  Lev replied 8 months ago.

Lev :

Hi and welcome to our site!
Income is NOT recognized as long as the property is not sold.
So - if you own the property - there is no income. Income will recognize in the year of sale.
You may not shift income recognition to a different tax year. Sorry.
If you will use the property as your primary residence at least two out of last five years before the sale - you will be eligible to exclude part of the gain (not related to depreciation recapture) from taxable income.
However - because the property was rental property before conversion into your primary residence - you need to use it as your residence at least five years to be eligible for the full exclusion.

Lev :

Let me know if any clarification needed.

Customer:

Thanks for the quick response. Independent of the change in status of the formal rental property, we are considering making a charitable contribution and wondered if the contribution of the gift and recognition of higher income could be timed to occur in the same tax year.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22636
Experience: Taxes, Immigration, Labor Relations
Lev and 7 other Tax Specialists are ready to help you
Expert:  Lev replied 8 months ago.
Appreciate your positive rating.
If you plan to sell the property and know that there will be taxable income which you will not be able to exclude - you may plan your charitable contribution accordingly - so these transactions will be occurred during the same tax year.
To be précised - we need to estimate your possible income and deductions.
As you might know - charitable contributions are deducted as part of itemize deduction and are reported on schedule A.
Please be sure to ask if you need any help with calculations.

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