Thanks so much to both of you - Opus & Mike. This is so interesting! lol
Seriously though - HUGE help helping me wrap my head around this.
IF you're in a glutten-for-punishment kind of mood...below I'll summarize estimated numbers for our ACTUAL situation.
Still active duty currently.
2003-2005: Purchased triplex for $500k...lived there 1st 3 years until I had to PCS. Lived in the "owner's unit" (rented it out after we PCS'd) and have always rented the other 2 units.
I've always considered our "owner's unit" as about 50% the property value...biggest, nicest, highest market rent.
2005-2012: served in another state.
2012-2014: PCS'd back to the region but duty station was ~90min drive away, so lived in the owner's unit again 2012-2014 and extreme-commuted (sometimes stayed 1 night/week at local base to make it more bearable).
(Therefore I assume we'd need to sell by 2027 to get the full military cap gains tax exemption).
2014-present: Same duty station, but we moved to live closer to work.
Depreciation:(always MACRS) ~$131k (see question below).
Cost basis: $500k-$131k = ~$370k (I think that's how it works).
Sell: $1.1M? May be able to sell for $1.1M - ~$100k for all expenses of sale.
Capital Gain: ~$1M = $300k = $700k.
Exemption: ~50% (owner's unit) of $700k = $350k (is that right)?
Taxes: Federal 20% bracket + 3.8% investment tax applies + 9.3% vs 4% CA(?)
QUESTION: Our rental property's in CA, so we file a CA 540-NR form for it every year, so I assume we'd have to pay the 9.3% but rental is our only CA income (maybe $20k/yr) as our true domicile is a tax-free state....if it's based on our CA rental income only it's likely 4%)
...So, 33% or 28% (ish).
I'll assume ~28%.
QUESTIONS:
$700k cap gains x .33 = $196k cap gains tax bill (Military tax exemption would reduce that to ~$98k?)??
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QUESTIONS:
How do I get precise numbers for the depreciation and improvement costs over the years? Turbotax has kept a list in Rental "Assets" (improvements). It shows 2013 I had $30k Sec179, $4k Special Depreciation, $8 Depreciation and "Prior Depreciation" $123,594, so I should be around $131k total depreciation so far, correct?
And I assume the depreciation logged in TurboTax accounted for the years we lived there (is that even relevant)?
How does one prove they resided in the property for the 2 years? I assume proof's only needed if audited(?). We refinanced the mortgage while living there 2012-2014, so that reflected the property address. I also should have:
Copy of old drivers license and car registration with that address.
Military PCS orders (to the region).
Utility bills with that address (might be able to find).
What else might be requested?
("PCS" = Permanent Chane of Station, i.e. the military moved me)
