Capital gains taxes on the sale of a second home (condo)

[EricGFields]

I'm wondering about the capital gains taxes on the sale of a second home (condo). Although my wife and I never lived in the condo (we did stay in it each year for about 2 weeks each year), it was purchased in 2012 for our sons to live in while they were in college. So, it was used for both family AND for rental purposes: We rented out the extra rooms to friends of theirs to make college more affordable for all. All to say, we are now selling the condo, and we see that there are capital gains taxes for investment properties, meaning second homes or condos like this. Is that still true if our dependents lived there the entire time? We have owned in for 9 years (2012-2021) for the purpose of having a place for our sons to live. Thanks for any help you can give on this.

[M-MTax · Accepted solution]

It is still true even if your dependents lived there. You have to pay tax due on capital gains no matter what. Also you should have reported the income from the renters and taken depreciation deductions but that's history at this point.

[Mike9241]

did you charge the renters fair market value rent.  if not it's considered personal use.

every year the expenses should have been prorated between rental and personal use. the rent and the portion of any mortgage interest and taxes related to the rental should've been reported on schedule E each year and were not limited (except by the passive activity rules) other expenses you paid and depreciation you should have taken would be limited to any remaining gross income and be carryforwards.

failure to report the depreciation could result in underpayment of taxes if the taxes you pay on the capital gain are less than the takes you would pay on the depreciation recapture. 

court case. taxpayers received $500monthly rent for house rented to parents.  all use was personal use since rent was less than fair market value.  those no rental epsnes were allowed but the taxpayers were required to include all rent received in gross income (Jackson TC Memo 1999-226)

your choices are to wing it or consult a tax pro to discuss what should be done for the year of sale. 

[Yup Luu]

I have a similar problem.  Now I see that I have to pay capital gain.  I think this capital gain will increase my AGI.  My concern is whether the capital gain from selling the house may also trigger AMT? THanks, 

[Yup Luu]

Appreciate someone can help figure out the the following:

I have an accumulated rental loss of 60,000 as of 2021.  I sell the rental property in 2021.   I paid for 1.05M, sold it for 1.18 M, the depreciation recapture is about 100,000.  The selling expense is about 70,000, so my gain is 160,000.

My questions are:

1) is the net gain 100,0[phone number removed]0)?

2) among the net gain, I pay 25% on 60,000, and pay capital gain tax (18.8%) on 40,000?

3) will the gain (100,000) bring me to a higher tax level (for example 22% to 24%) even through the tax rates are different from my ordinary tax rate?

4) will the gain (100,000) trigger AMT (if last year's AMT is almost triggered w/o the 100,000)? 

5) Can charity contribution help reduce taxes?

Thank you!