My husband and I bought a home in 2008 with the intent of living in it for about six years and then selling it. He is in the military and unfortunately, they decided to transfer us after only two years. We were not able to sell the home in 2010, because the home's value had gone down so much in those two years. We decided to rent out the property, instead of selling it at a huge loss. Now it is almost 11 years later and the home has increased in value and our loan has obviously been paid down significantly. We never wanted to own a rental property and we would like to sell it so we can finally own our primary residence again. (We have been renting homes for the past 11 years at each duty station). We are up for a transfer this summer and after looking into the new area, we have discovered it is much cheaper to buy a home than to rent one (about $800-$900/month less expensive).
Is it possible to sell our rental home and use the money from that sale to buy a primary residence without having to pay capital gains taxes? If not, what are the tax rates for married filing jointly? I am guessing at this time that the price we could sell our rental home for would be about $125,000 over what we owe on it (without accounting for a realtor fee or taxes). I'm looking for any advice. We have a VA loan and while I know we *could* possibly use any unused portion of that benefit, after talking to our bank, they said we would have to come up with a down payment of about $33,000, which we don't have right now. Thanks for any help you can give!
