Taxes on sale of apartment in our residence?
We own a 2-family brownstone in Harlem, NYC. We currently rent the basement apartment and live in the rest. My wife has suggested we sell the basement apartment as condo, using the proceeds (after some reno costs) to lower our monthly mortgage, but I am unsure what the tax implications of this would be. Does the sale of part of your residence count as regular taxable income, or can it be taxed at a lower rate than my regular income?
@Aaron Kneile Just because you can rent part of your house, does not mean that you can sell part of your house. You need to look into how the property is registered with the city/county. My guess is that it is a single tax record. If so, you need to find out if you can split the tax records into two. Even if the city/county will allow you to do that (I am sure there is a cost associated to it), you need to check with your mortgage lender if they will allow you to hold onto the mortgage and what needs to be done to appease them. My guess is that the mortgage lender is not going to allow you to split the property under the current mortgage. They will recall the mortgage and you will need to refinance the top portion (where you live). As you can see there are a lot of steps you will need to take and have them coordinate and happen at the same time to pull this of.
Good luck,
Upen Pate
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Thanks for your reply. We are zoned as a 2-family already. Selling the garden apartment wouldn't require any more than the usual hurdles. I'm just curious how the income from the sale would be taxed for some back of napkin calculations.
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