Selling a rental home

Selling a rental home has some interesting income tax implications.  

The following question was asked and answered on NJMoneyHelp.com:

Q. We may sell a condominium that we have been renting out. We would buy something else in New Jersey. What are the tax implications on the sale of the home? We have not lived there for the past three years.
— Landlord

A. There are several tax implications to consider.

This is considered a rental property, so you will pay tax on the net gain, including potential depreciation recapture, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

He said depreciation is the systematic expensing of the cost or the building and improvements, and a percentage of that cost is taken as an expense each year.

“Recapture may occur upon sale depending on the method used for depreciation,” Karu said. “If it happens, there is additional income recorded at sale.”

But, he said, if you’ve had non-deductible carry-forward losses, all will be deductible in the year of sale.

“Carry-forward losses occur when the loss incurred in any calendar year is not deductible due to income or other limitations,” he said. “If that happens, the losses may be deductible in subsequent years.”

The gain is calculated by taking the gross selling price and deducting the cost basis plus any costs of the sale including, including any expenses you have fixing up the condo, he said.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published on March 10, 2020.

Remember to always seek advice from a personal professional tax and legal advisor who understands your unique individual circumstances.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Capital gains tax when you sell your home

Will you owe income taxes when you sell your home in New Jersey?

Capital gains tax is tied to how long you have owned your home and how long you  have lived in it.

The following question was asked and answered NJMoneyHelp.com

Q. I bought a house in December 2016 and I expect to sell it in June 2020 for $745,000. I’m moving to North Carolina for a job. The exemptions for the exit tax confuse me, including the line that says “you must have used the home that was sold as your primary residence for two out of the last five years.” I haven’t had the home that long, and I file taxes married filing jointly.
— Moving

A. Congratulations on the new job.

On your move, taxwise, you should be okay.

The State of New Jersey follows the federal government when it comes to the sale on a home.

Internal Revenue Code Section 121 gives an exclusion of up to $250,000 of capital gain from the sale of your main home or $500,000 if your filing status is married filing jointly, said Cynthia Fusillo, a certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

There are two tests to qualify, she said. One is for ownership and the other is for use.

“You must have owned your home, and used it as your main home, for a period totaling at least two of the most recent five years immediately prior to the sale date,” Fusillo said. “Based on the fact pattern you provided, you should be eligible to exclude the expected gain on the sale of your home.”

She said you will have to report the sale on your tax return for the year of sale based upon the expected sale price.

However, the resulting gain, if falling within the $250,000/$500,000 parameters, will not be taxed, she said.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published on March 12, 2020.

Remember to always seek advice from a personal professional tax and legal advisor who understands your unique individual circumstances.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

Sphere: Related Content