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This might be more of a real estate tax question. I bought…

Hi. This might be more...
Hi. This might be more of a real estate tax question. I bought and lived in a townhouse for 10 yrs. (cost $160000, it is now worth less, maybe 110000) and I have rented it for the last 2 yrs. I am getting good rent but would like to sell it in 2018. Could I turn the money over to pay off/down the mortgage of house I've bought since without paying taxes? Would I have to pay any taxes on it sinc e I'm selling at a loss?
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Customer reply replied 7 months ago
The property is in Florida.
Answered in 7 minutes by:
12/30/2017
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,627
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Based on the information you provided, it appears that you would have a loss on the sale even though the property was rented for the past 2 years even with the depreciation recapture. Because you owned and lived in the house for 2 of the 5 years immediately preceding the sale, you also receive the sale of home exclusion (up to $250,000 for single filers/$500,000 for married filing jointly filers).

Paying off/down a mortgage on another house has no effect on whether or not you pay taxes on the sale of another home.

If you sell at a loss, there are no taxes to pay, but you will have to report the sale on your tax return.

Please let me know if I can assist you further.

My goal is to provide you with excellent service. Please take a moment to rate my answer with a 5-star rating to let me know that I have achieved my goal.

Thank you and best regards,

Barb

Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,627
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Customer reply replied 7 months ago
Thank you. ***** sell outside of the 5 yr (living in home 2 of the last 5 yrs.), would have no affect on paying taxes, as long as it was still at a loss, right?
Phone call session started

It was a pleasure speaking with you.

As I mentioned, the points to remember/consider are:

1. Keep an eye on the value of the rental to avoid selling at a gain in the future.

2. Remember the 5-year window to qualify for the sale of home exclusion.

3. Depreciation recapture applies whether or not you actually take depreciation.

Please do not hesitate to let me know if you have any other questions.

Once again, Happy New Year to you and your family!

Barb

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