Do I get taxed on cashout? 1st House. $110K, Refinanced $161k 2yrs later & cashout. Purchased 2nd house w/it. 6yrs later converted 1st to rental, 4 yrs later (2016) sold

[cubanitolatino]

Sold property for $158K on 2016. Between years 2-6 (2006-2012) went back and forth between rental and primary (sometime both in same year) also reported depreciation in the last 4 years (about $12K). 

[view2 · Accepted solution]

Try this with pen and paper.[Refinancing will not have an effect on basic numbers for calculation gain or loss]

The formula for calculating your cost basis on rental property is as follows:

* Purchase price

* + Purchase costs (title & escrow fees, real estate agent commissions, etc.)

* + Improvements (replacing the roof, new furnace, etc.)

* + Selling costs (title & escrow fees, real estate agent commissions, etc.)

* - Accumulated depreciation (as reported on your tax forms)

* = Cost Basis

And then calculating your profit or loss would be:

* Selling price

* - Cost Basis

* = Gain or Loss

[cubanitolatino]

Thank you for your answer. Very helpful 🙂

[view2]

Your welcome.