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Capital Gains tax on home i lived in for two years, but rented one of the room?
Anonymous3 views2 answers
I bought a Home through an FHA loan 2 years ago. I do not own any other property, so i lived in the home the whole time. After the first year of living in it, i had my father come to live with me and he paid a very minimal rent. Now, i am thinking about selling the home, i should be able to qualify for the $250,000 capital gains deduction on the profit i m making on the home. How does my father paying me rent for 1 year for a room that represent about %20 of my home effect my profit?
PS - I filled the money he paid me as rental income on my taxes.
Generally speaking, it means that some of your income cannot be excluded even if your total gain is under the $250k limit; it also means that some of the gain that cannot be excluded will also have to treated as ordinary income (i.e., not capital gain) to the extent that you could have claimed depreciation, even if you did not in fact claim any depreciation.
20% of the profit will be taxable capital gain that does not qualify for the Section 121 exclusion. There will be some depreciation recapture which will be ordinary income. Have your CPA run a pro forma tax return.
