Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Zocky Zhang
Did you live in it for at least two years? Either way it has to be reported. But primary residences have exclusion ($250k single and $500k for married). Had to have been primary home for 2 of 5 past years, and my accountant told me you can’t use as rentals (although others in bp seem to think differently)
Did you live in it for at least two years? Either way it has to be reported. But primary residences have exclusion ($250k single and $500k for married). Had to have been primary home for 2 of 5 past years, and my accountant told me you can’t use as rentals (although others in bp seem to think differently)
We didn't live there, but we paid water and electricity every month. We rented to live somewhere else, so can we claim it as primary residence? I know a couple can have two primary residence.
We sold the house 30 months after we bought it and profit is less than 250k.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
What you owe is long term capital gains tax and it should be paid in the year you sold the property. It's 15 to 20% of the net gain. (the difference between your investment and the sale)
Because you rented the property, you'll also have to pay depreciation recapture. This tax is paid at your normal income tax bracket rate.
Don't delay sorting this all out as penalties and interest will accrue.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
And to answer another question, if you didn't live in a property, it can't be claimed as a residence. Just "owning" it doesn't mean you reside there.
Taxes should have been paid yearly on the rental income. The utilities and so forth that you paid reduce your rental income but aren't part of the basis of the property. ie, they don't impact the sale price profit of the property.
You probably should find a CPA that can help you sort all this out as it seems like you may need to file some amended returns to cover the period since you bought the property.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Zocky Zhang
I see you are trying to claim residency by having the utilities in your name. But, you really should talk to a tax professional about your proper course of action. I'm sure the rest of your mail (e.g. bank statements, credit card statements, etc.) were mailed to your other residence. Where are your tax forms being mailed to/from? You'd have to cover a good deal of avenues to be able to support that you lived there. Were you filing Pennsylvania state taxes or Maryland State taxes?? Where you working relative to the two domiciles? See what I mean...
For Federal tax purposes, look up 1040 Schedule E which is how you report rental income properties. There is another form for declaring the sale of real property. You need to talk to a tax professional. You probably are going to need have to file amended tax returns for 2016, 2017, and 2018. I think you lucked out since you can amend the past three years of tax returns --- again, check with a tax professional if its too late to amend the 2016 return. I THINK its in your best interest to file amended returns to record your depreciation and expenses. On the sale, which you have to report in your 2019 return (the return you file by this April 2020), you are going to have to report the sale and, to be legally correct, you will have to pay for the depreciation recapture (the IRS makes you take depreciation, so they calc depreciation recapture regardless of whether you filed your prior returns properly with the depreciation).
What you owe is long term capital gains tax and it should be paid in the year you sold the property. It's 15 to 20% of the net gain. (the difference between your investment and the sale)
Because you rented the property, you'll also have to pay depreciation recapture. This tax is paid at your normal income tax bracket rate.
Don't delay sorting this all out as penalties and interest will accrue.
Seems I wrongly expressed myself,I didn't rent out this unit we bought in Philadelphia , but we rented to live in another condo in Maryland. So there wouldn't be any rental income to report.
What you owe is long term capital gains tax and it should be paid in the year you sold the property. It's 15 to 20% of the net gain. (the difference between your investment and the sale)
Because you rented the property, you'll also have to pay depreciation recapture. This tax is paid at your normal income tax bracket rate.
Don't delay sorting this all out as penalties and interest will accrue.
Seems I wrongly expressed myself,I didn't rent out this unit we bought in Philadelphia , but we rented to live in another condo in Maryland. So there wouldn't be any rental income or depreciation to report.
The rehab was done in 2016 and 2017 and I paid cash to my contractor, no official receipt for the work, can I just report the capital gain without receipt of those expenses?
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Zocky Zhang
You really need to talk to tax professional. With no rental activities and probably no documentation to attempt to substantiate, this can look like a flip deal which makes it active income. That is, ordinary income subject to self income tax and basically. no different than ordinary wages/salary. While if federal audit is pretty low nowadays, but three years and no prior SchE filings and then you try to claim as long term capital...
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
Btw, expenses paid in cash are tax deductible - like all expenses you need a receipt. Ask the contractor to give you one. Or, use withdrawals from your bank as proof? Or pictures of the house before and after? You definitely want to have that expense for your taxes!