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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29649
Experience:  Taxes, Immigration, Labor Relations
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Weve moved into a home weve owned for several years as income

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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?

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.


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 and 2 other Tax Specialists are ready to help you
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.