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Ratings. Guidance. The Right Lawyer.
I'm upside down on my house.I want to rent it. What happens when it sells in 5 yrs and I'm still upside down. Do I owe taxes?
Kingman, AZ
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Posted 6 months ago in Tax
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Bought home Dec. 2005 for $265k. Owe $205k. Valued at $180k today. Will I still have tax consequences regarding depreciation from renting it out even though I will still be upside down for years to come?
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Answers (1)
Mark L Rosenberg
This attorney is licensed in Dist. of Columbia and 1 other state.
Posted 6 months ago.
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When you convert your home to an investment property, you can lose the ability to take the exclusion from taxes when you sell it ($250K for single, $500K for couple). You may want to move back into the house before you sell it, because the exclusion applies if you lived in the house for a certain period before it was sold. While it is being rented, you are required to pay tax on the income from the rental, but this will be offset by your expenses, including depreciation. However, the depreciation may be subject to "recapture" when you sell the house. Consult your tax advisor for more details.
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