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I JUST SOLY MY HOUSE, I RENTED 1 FLOOR FER YEARS AND

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I JUST SOLY MY HOUSE...
I JUST SOLY MY HOUSE, I RENTED 1 FLOOR FOR A FER YEARS AND PAID TAXES ON RENT AS ADDED INCOME. MY QUESTION IS, WHY SHOULD I HAVE TO PAY 12,000.00. WE WERE UNDER THE 500,000.00 CAPITAL GAINS LIMIT. PLEASE LET ME KNOW
Submitted: 2 years ago.Category: Tax
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Answered in 7 minutes by:
6/11/2015
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,226
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,
So sorry to be the messenger here, but when you rent all (or a part) of the house, that makes part of the time what what's called "disqualified use."
To get a full exclusion of ALL capital gain (up the the 250,000/500,000 limit) the house must be used EXCLUSIVELY as a primary residence.
YOu can read more about that here, in an article by ***** *****, Enrolled Agent.
http://taxes.about.com/od/capitalgains/qt/home_sale_tax2.htm
From there:
"Taxpayers can qualify to exclude up to $250,000 in capital gains ($500,000 if married and filing jointly) when selling a house. To qualify, the person needs to own and live in the property has his or her primary residence for at least two years out of the five years ending on the date of sale.
Sometimes, however, the property isn't used as a primary residence during the entire five-year period. The house might be rented out, used as a vacation home, or used as a second home. Such uses of the home will be considered non-qualifying use and could subject gains from the sale of the house to tax.
Qualifying use means the property is being used by the homeowner or the homeowner's spouse as a primary residence. Non-qualifying use means the property is not being used as a primary residence by either the homeowner or the homeowner's spouse.
Homeowners who have used the property exclusively as their primary residence (that is, no second homes or rental use) will not need to allocate their gain."
Hope this helps to clarify.
Please let me know if you have ANY questions at all...
Lane
(I hope you'll rate me positively, using the stars on your screen … (that's the only way we get credit for the work here) … based on thoroughness and accuracy, rather than any good news/bad news content )
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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