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Level 2

Capital gain tax

Hi I live in California. I bought a house in Texas in 2019 as primary residence as we wanted to move there. We waited for my daughters school to finish so that she can take admission there in college.  We kept the house empty for almost a year.   My husband also looked for   transfer there.  
Unfortunate my daughter did not get admission in college in Texas also my husband did not get transferred.  So we rented out the house


now I want to sell the house


how much capital gain tax do I have to give

is there any option I can avoid that tax as it was bought as a primary residence.  And due to unavoidable reasons we could not move there

4 Replies
Level 15

Capital gain tax

Q: "is there any option I can avoid that tax as it was bought as a primary residence."  


A:  Sorry, no.  The wording of the law is that the property must have been "owned and used as the taxpayer's principal residence", in order to qualify for the capital gains exclusion.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Level 15

Capital gain tax

@chutki0700 since you rented out the house, did you take the depreciation? if no, suggest getting your taxes done locally (in CA) once you sell - the recapture tax is going to be a mess if you didn't take the depreciation.  


What you really had (until you rented it out) was a 2nd home.......there is no capital gains exclusion on that.  The IRS requires you to live in that primary residence for 2 of the past 5 years to take advantage of the capital gains exclusion.  


Look at the bright side: you probably are going to have a gain on the sale. if so, you made money!



Level 2

Capital gain tax


Level 15

Capital gain tax

Q. how much capital gain tax do I owe?

A.  For an estimate, Try this tool Enter your regular income first to see the regular tax. Then add the sale to see the effect.
Enter the difference between the sale price and what you paid for it originally as a long term capital gain (LTCG). Enter the depreciation you've taken over the years (depreciation "recapture") as other income. Depending on how much total income you have LTCG are partially taxed at 0%, 15%, 20% and/or 23.8%. Depreciation recapture is taxed at your marginal rate, but not more than 25% (the Taxcaster tool is not capable of applying the 25% cap).

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