three ways to go -- which is best?
I bought a single-family home in Apr 2015 for $449,000, plus $6000 closing costs, as my primary residence.
In Sept 2019, I moved out and the house was immediately available to rent.
On that day, the FMV was $525,000. Over those 4.5 years, I spent $51,000 for property improvements.
I believe that makes my original Basis $506,000 (449+6+51) because that figure is lower than $525,000.
Am I correct so far?
In June 2020, I sold the property for $525,000 less $34,000 in selling expenses.
Does that mean I have a loss of $15,000 for tax purposes ($525-34-506) ?
For 4 months in 2019, the property produced no income with $4000 in expenses.
For 6 months In 2020, the property produced $11,000 income with $3000 in expenses.
Monthly Depreciation is $1027 but that appears to wash out as recapture when the property is sold.
It seems to me that I have 3 options:
- Treat it as a 2nd home for the full 10 months, both years. Easiest accounting.
- Treat it as a 2nd home for 2019 and a rental property for 2020. Would lose $4000 in deductions?
- Treat it as a rental property for the full 10 months, both years.
I'm leaning toward #3 because all $7000 in expenses would be deductible "above the line".
I do not have enough Sch A deductions to itemize in either year.
The numbers are getting a bit complex and my head is beginning to hurt.
Can somebody offer some guidance? What am I not considering?
