Over the last five years many homeowners in Houston Texas have decided to rent their homes out rather than selling them, but times have changed, and now that home values have increased, homeowners who were previously underwater with their mortgages have equity again and may be planning on selling their Houston Rental Properties.
Thanks to the IRS tax code we know that you can temporarily rent your primary residence without losing the all-important exclusion of capital gain but, this is also based on set five-year time limit.
About The Capital Gains Exclusion
During a 5 year period of time, you must have done the following:
- Owned your home for 2 years.
- Lived in your home, as your primary residence for two years.
- Ownership must have been continuous during this period of time.
To successfully take advantage of the capital gains deduction your home must be ready for sale and should be priced correctly, sold then closed within a period of six months.
Although most homeowners want all capital gains to qualify for the exclusion, the reality is that some of the gains might not qualify if depreciation has occurred during the period of time that the home was rented, but the good news is that depreciation is recaptured at a tax rate of 25%.
Timing Is Important
As with anything in life, timing is important, especially if your home is valued at $200,000 or more because it’s possible that you could have a tax liability up to $30,000 so like most people you will want to do everything possible to minimize or eliminate as many taxes as possible.
To learn more about taking advantage of the capital gains exclusion contact you tax professional today or to start the process of selling your Houston Rental before the end of the year click here.
Get Property Management Here
For professional property management for your Houston Texas Rental Property contact Vestpro Residential Services today by calling us at (832) 971-1841 or click here to connect with us online.