We are in our 80s. We have lived in our current house for over 10 years. We plan to move soon. We will not be buying a new home and would like to rent our current house for at least a couple years. What are our rules for the $500K capital gains exemption when we eventually sell our current home?
For a primary home, if you owned and lived in your house for 2 out of the last 5 years when you sell you can exclude the gain up to $250,000 for single or 500,000 for married from tax. You can not take a loss on your tax return.
But you will also have to recapture the depreciation you took or could have taken while you were renting it. The depreciation will be taxable.
So we could rent it for 3 years before we'd have to sell it and still qualify for the $500k exemption.
So if we claim the rental management company expenses but not depreciation, we won't have to adjust the depreciation on our income taxes when we sell it within 3 years? The management company expenses do not have to be adjusted later?