Hi..I have been a user of Turbo Tax for now 15+ years and purchased the 2019 Premiere. I live in NC state. I purchased a property in Oct 2007, say for 250K and it became my primary residence. The land value at the time of purchase was, say 25K. I added renovations to the property, say 30K. In Dec 2016, I purchased another property, which became my primary residence. From the old property I borrowed (HELOC), say $ 125K to put a down payment on the new property. When I closed the new property, I rented out the old property. It was rented all the way till Dec 2019 and now it is vacant. I am either attempting to rent it again or sell the old property.
If I decide to sell the old property, say for 400K, and it closes in May/June 2020, while it is not been rented for whole of 2020, I have the following questions:
1. In 2020, will it be considered an investment property?
2. Will the 2 of the 5 year rule still apply for me to avoid any capital gains tax in the year 2020 without reinvestment of the sale proceeds, since I already bought another house in Dec 2016? Joint ownership 500K
3. If it is considered an investment property and the sale in 2020 will incur capital gains tax, based on the original land value, what will be the approx gains tax amount? How will I calculate inside Turbo Tax in 2020? The property tax value for 2020 is say 350K. Also, if I have taken depreciation for 3 years during rental and deducted rental expenses, will that count into capital gains determination as well?
4. Will Capital Gains apply for both Federal and State? If you can suggest %
5. Since I will have to pay off Mortgage and HELOC post sale, will that reduce Capital Gains tax?
6. If I reinvest the sale amount within 120 days paying off the mortgage balance and HELOC, will it avoid Capital Gains? Does the new investment has to be another real estate or can it be mutual fund, IRA, stocks, etc.?
7. Would it be best to continue to rent or sell the property? I was thinking selling and applying the 2 of 5 year rule and avoid Capital Gains.
Appreciate your reply!!
