Hi all,
If my rental property satisfies the 5-year rule (I lived there for first two years as primary residence, then rented it out for 3 years then sell), I know I don't pay capital gains taxes, and need to pay depreciation recapture still.
However, how would my total taxable income/adjusted gross income be calculated? Aka which one of the following is it?
a - wage income only
b - wage income + depreciation recapture (3* annual amount)
c - wage income + depreciation recapture + capital gain from sale of home
d - others -- please comment
I know capital gain won't be taxed, but my main confusion is whether it will be included as total adjusted gross income? Really appreciate some help here as I try to plan for taxes -- in case the sale will push me to a high tax bracket. References to relevant irs rules are even better.
Thanks a lot in advance.
