I bought a condo in 2005 and rented it until 2016, when it became my primary residence until 2020, when I moved to a new primary residence and put the condo back out for rental. Now selling the condo. Is there a way to exclude the gain in value during the period it was primary residence? Also, many improvements made during period of residency, that contribute to a higher selling price today, but these have never been deducted as expenses against rental income, or depreciated. Can those be added to basis?
Appreciate any inputs, and where to record them on TT.
Long story short = you can't exclude any gain and the improvements can be added to basis.
There's a rentals section in turbotax so enter the sale in that section.
Here's a timeline you should have followed:
2005: start depreciation with your cost basis....
2016: stop depreciation....
2020: start depreciation again with your new adjusted basis.....cost plus improvements minus previous depreciation deductions.
You have a tax issue. If those improvements were made or were in service during any of the rental periods you were required to take depreciation on them. The tax laws say that even if you didn't you must report the sale as if you took the proper depreciation and recapture that as section 1250 gain. You cannot deduct the missed depreciation in the year of sale, but it can be corrected by filing form 3115. I strongly suggest you consult with a tax pro to correct the failure. Improperly reporting the gain and taxes thereon, if caught, can lead to significant penalties and interest.
Since you will not have lived in the property as your primary residence for at least two years (730 days) of the last 5 years (1826 days) you owned it, counting back from the closing date of the sale, you do not qualify to exclude any realized gain on the sale from being taxed. But you still have a problem that will require a tax professional to deal with properly.
Your property improvements should have been added to your cost basis and depreciated from the time they were placed in service. Apparently, you didn't do that. A tax pro can help you get this corrected and keep your fines and penalties to a minimum, if not completely negate them.