Dallas, TX · Member since 2016 · 32 posts · 2 votes
Good afternoon,
I got a loan on a condo and lived in it for many years while I had a homestead exemption on it. I moved out and rented it and forgot about the exemption. Recently the tax office sent me a bill for 2 years of back owed taxes I have to pay immediately. Is there anything I can do to remove or at best reduce this?
Also,
If I sell the property, how do I figure out if I will pay capital gains on it or not? I believe there's a time limit of when I move out and can sell the property to avoid this?
The IRS sets the rules on capital gains. A simple google search will give you all your answers there. Basically there is a multi-part test you have to clear to be able to avoid paying the capital gains... part of it is living in the property 2 of the last 5 years, etc, etc. It's a bit complex, but not hard to understand from their pamphlet you can find online.
As for the tax bill - I doubt there is anything you can do - other than maybe petition them to make installment payments. You are only entitled to the exemption when you are living there, and "Hey I forgot" and "Man - I didn't know" aren't going to do you any good with a taxing authority. Realistically - the taxes should only be about 2 months of rental income per year - so you should be able to make that up in a matter of months just from your rental income.
Usually the taxing authority is pretty quick to pick up on when someone moves out of the property, because the owner should move their exemption to their new house. If you are just renting, maybe that didn't happen. If you did buy a new home you are living in - you might go to them and say, "Yes - this old one was rented - but I didn't move my exemption to my new house, so can there be an offset there? If it is simply a case that you are now renting as well, you are pretty much going to owe the taxes, and you just have to chalk it up to "owner mistake" and move on.