Selling a home and renting

[Steve10S]

I am 72 and my wife and I are thinking of selling our home and becoming renters. What are the tax consequences of doing that?

[xmasbaby0]

SALE OF HOUSE

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premium software to report the 1099-S

NOTE:   If you have ever used the home as rental property or claimed a home office, you have more information to enter.

And...of course---if you have been itemizing  home ownership deductions such as mortgage interest or property tax on your tax returns, you will no longer be able to do that and will just use standard deduction.

RENT

There is not a rent deduction or credit on your Federal return.  If your state has anything for renters you will be prompted to enter your rent info when you complete your state return.  As far as I know, the states that have anything for rent are Arizona, California, Connecticut, Hawaii, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Rhode Island, Vermont, Washington DC, and Wisconsin.

https://www.rent.com/blog/states-with-a-renters-tax-credit/

[Gabriella_EA]

The tax consequences of selling your home depend on a few different factors, including your filing status, what you originally paid for your home (plus what you've spent improving it over the years), how much you sell the home for, and how long you've owned and lived in the home. Many people can qualify to exclude some or all of the gain from selling a home, but there are specific rules. This article summarizes those rules well.

Additionally, if you're itemizing deductions based on home mortgage interest and property taxes, you'll no longer be able to do that as a renter. Some states offer tax credits to renters, particularly those over age 65. You can check your eligibility here.