Hello.
I purchased a home in 2006 for $84,000. In March 2019, I moved in to my partner's home and rented out the property I purchased in 2006. During the 4 years Mar 2019 - May 2023 I rented out the house, I was charging $1200/ month rent. My partner and I got married in May 2023. I sold the house I had been renting out for $220,000 (I still owed approximately $60,000 on the mortgage) and he sold the house he owned and we had been living in because we were moving from Texas to Minnesota for new jobs. In the 15 years I owned the home, I spent approximately $25,000 - $30,000 (new kitchen, refinished floors, new windows, new hvac) in capital improvements and an additional $20,000 preparing it for rental, preparing it for sale, and upkeep (painting the exterior and fixing, a break in the sewer line that ran from the house to the main sewer line), and I paid approximately $15,000 in realtor fees, closing costs, etc.. I subsequently purchased a new home in Minnesota in June 2023.
1. Is it accurate that I will be able have a prorated capital gains exclusion of 50% because I lived in the house 1 year out of the 5 before selling and I sold because I was moving out of state for a new job? Does the 12.5 years I lived in the house before turning it into a rental count for nothing when it comes to capital gains taxes?
2. I don't really understand how depreciation, capital improvement expenditures, and expenses impact capital gains taxes. If I made $136,000 on the sale, but spent $25,000 on capital improvements, $20,000 on repairs, and $15,000 when selling, when depreciation is taken into account, what amount am I actually paying capital gains taxes on?
3. The house that was being rented was in my name. The house that my now husband and I lived in was in his name. He made about $100,000 on that sale (capital gains do not apply because it was a primary residence). Our combined income is about $200,000/year before taxes.
