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I'm in a similar situation here and wanted to know the appropriate treatment. Any change to the way you described in this thread?
Hi, I'm trying to understand. If you buy a house in 2022, rent it for 3 years, then live in it 2 years, then rent it again for 2 years, then sell. The capital gain on the sale is excluded up to the $250k or $500k? And that's because 1) it was primary residence for 2 of last 5 years and 2) last person to move out is a renter. And you still get the exclusion even though it did initially start out as a rental? So it doesn't matter if it starts as a rental as long as you live in it as primary residence for 2 of last 5 years AND the last person to move out is a renter?
@swuelfing That is correct EXCEPT you must still recapture the depreciation allowed or alloable on the time it was a rental. This cannot be excluded.
Ok, then just to be sure: Say you buy a house and rent it for many years, say 10 years. If you want to sell with the full $250k/$500k LTCG exclusion, then you need to move in and use as primary residence for 2 years. Then you need to rent it again say for a year or 2 so that the last inhabitant was a renter. Now you can sell with the full exclusion?
Just moving in for 2 years is enough ... you do NOT need to rent it out again.
I thought that if you rent for a while then move in for 2 years prior to selling, you have to pay LTCG tax on the percentage of time it was rented
Not quite right ... you must recapture the depreciation allowed or allowable on the time it was a rental as ordinary income not cap gains. This cannot be excluded.
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