Non-qualified use tax on primary residence

[Eric Richison]

Hi all,

I'm looking into the tax implication of selling my current primary residence, which I used as a rental during a 4 year stint my employer sent me abroad. I'm interested to learn if there is any exceptions to the non-qualified use period or if the only option is a 1031. Here are some of the details.

Purchased: May 2010 @ 325k

Primary residence: May 2010 - July 2013

Rental: July 2013 - July 2017 (Period my employer sent me abroad)

Primary residence: Aug 2017 - Aug 2019 (targeting to sale Aug 2019 to qualify for the 2 out of last 5 year capital gains exclusion)

Estimate sale price: $675k

Profit: $350k

Must I count the 4 years my employer sent me abroad and I rented the property as non-qualified use? 

If my math is right this would amount to ~44% or ~23k in capital gains tax @ 15%.

For completeness, I'm also aware I must recapture the depreciation @ 25%.

Thanks in advance.

[Ashish Acharya]

@Eric Richison , 

Please talk to your CPA before relying on this calculation :

Total ownership period	9.3
Non-qualified use		4
Gain			350k
Non-excludable gain	151k
Remaining gain		199k
Remaining gain of $199 can be excluded under 250/ 500k exclusion

This is a general calculation. It does not factor in selling expenses and your basis is not adjusted for the depreciation. The part of the gain is taxed at ordinary rate max up to 25% as depreciation recapture.