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Deductions & credits
No, you don't pay tax on the rental income. But recapture is something different. I have to go out now, I will try and explain later if no one else does.
Also, my answer about excluding gain is probably wrong, and you will owe more tax than I thought. Some of us are talking about it and we will get back to you. Basically, the problem is that at some point, the IRS decided that if a taxpayer has a rental with a large capital gain, they should not be able to make it tax-free just by moving back in to it for 2 years before selling. (The tax break was created for homeowners not landlords.) So they made up some really complicated rules that I think are going to cause you a tax bite. But we are trying to figure it out and will update you when ready.
Also, my answer about excluding gain is probably wrong, and you will owe more tax than I thought. Some of us are talking about it and we will get back to you. Basically, the problem is that at some point, the IRS decided that if a taxpayer has a rental with a large capital gain, they should not be able to make it tax-free just by moving back in to it for 2 years before selling. (The tax break was created for homeowners not landlords.) So they made up some really complicated rules that I think are going to cause you a tax bite. But we are trying to figure it out and will update you when ready.
‎June 7, 2019
2:57 PM