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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Capital Gains and Losses
Satisfied Customers: 263
Experience:  Over 20 Years experience in resolving tough tax cases
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I am closing on a house next week. I purchased the house in

Customer Question

Good morning. I am closing on a house next week. I purchased the house in 2012 with the thought of moving into it. However, I month after purchasing the house, I took a job in another state. I had the home for 80 days before I began renting it out. Of course I'm trying to minimize my tax obligations at this point so I've been scouring the web for ways to do this. There is an interpretation of the tax code which states that even though one hasn't lived in their home for 2 years prior to selling, they can utilize a percentage based on how long they lived there. In my case it would be 80 days or 80/720*250,000=$28K. I have a tax preparer but I've had her since I was in the military and she's not very advanced so I don't know if she is qualified to do this. Any advice on this and any other ways to minimize my tax burden, would be most appreciated. Thanks.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Tax-Scholar replied 1 year ago.

Good morning and thanks for using Just Answers. You're on the right track and will be able to exclude 28K (and if married double that amount). Take a look at Publication 521 and Form 3903 for moving expenses. Let me know if you have any additional questions after taking a look at Publication 521. Hopefully the moving expenses will help offset any gain on the sale of your home.

Customer: replied 1 year ago.
Ok. Thanks. Yea I've deducted the moving expenses and repair expenses in the past. This may be a dumb question but I had to be married during that 80 days of occupation to double it corrrect? I'm married now but I wasn't then...
Expert:  Tax-Scholar replied 1 year ago.

Yes you would have had to live there with your spouse. Her calc would really just be

0/720*250k = 0 with the facts given.

When calculating your gain on the sale make sure to include in your basis

1) Your original cost

2) Any improvements made

How did you deduct repairs in the past? Normally repairs are not deductible as personal expenses.

Customer: replied 1 year ago.
By repairs I mean I conducted major Reno to get the house "rentable"
Expert:  Tax-Scholar replied 1 year ago.

Ok just wanted to make sure.

Customer: replied 1 year ago.
Correct me if I'm wrong but I can claim repairs and/or expenses for things done to get the house more desireable for sale correct? ie painting, lawn work, etc within 90 days of sale?
Expert:  Tax-Scholar replied 1 year ago.

Often times these cost get capitalized to the basis of the property. This would then give you less capital gain on the sale.