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dewild25
New Member

I sold house I lived in for 2 years and rented for 9. Am I exempt from capitol gains because of Sec121? What would my tax rate be on the depreciation recapture?

 
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Zbucklyo
Level 9

I sold house I lived in for 2 years and rented for 9. Am I exempt from capitol gains because of Sec121? What would my tax rate be on the depreciation recapture?

No.  If you lived in the house originally, and you've rented it for the past nine years, you are not eligible for for the $250,000/$500,000 exclusion from capital gains, because the house was not your residence for two of the past five years.  And if the years are reversed, and you have lived in the house the past two years, the first nine years are considered 'non-qualifying use' and also not eligible for the gains exclusion.  See:

https://www.kitces.com/blog/limits-to-converting-rental-property-into-a-primary-residence-to-plan-fo...

On depreciation recapture, the tax rate would be the smaller of your marginal tax rate and 25%.


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Zbucklyo
Level 9

I sold house I lived in for 2 years and rented for 9. Am I exempt from capitol gains because of Sec121? What would my tax rate be on the depreciation recapture?

No.  If you lived in the house originally, and you've rented it for the past nine years, you are not eligible for for the $250,000/$500,000 exclusion from capital gains, because the house was not your residence for two of the past five years.  And if the years are reversed, and you have lived in the house the past two years, the first nine years are considered 'non-qualifying use' and also not eligible for the gains exclusion.  See:

https://www.kitces.com/blog/limits-to-converting-rental-property-into-a-primary-residence-to-plan-fo...

On depreciation recapture, the tax rate would be the smaller of your marginal tax rate and 25%.


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