Thinking about converting your rental property or vacation home to a principal residence?
Hoping to take advantage of the $250,000/$500,000 exclusion when you do?
Then “caution” is the watchword. You see, the tax laws have changed and how you handle the conversion process can have a huge impact on how much you pay Uncle Sam.
You’ll get all the facts when you read my new article titled Tax Tips: Taxes You Pay When You Convert Your Rental Property to Your Principal Residence.
Three ways our fact-filled article can help you:
- We’ll explain the change in the tax law. Remember the days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes? Well, those days have long past. Today’s law requires an “allocation” that keeps part of your current rental as a rental. This means you have to pay taxes on that allocated part. We’ll explain this in detail when you read the full article.
- We’ll show you how to “divide” your period of home ownership. The law requires that you divide your period of home ownership into two categories: “qualified” and nonqualified” use. Want to know how the IRS defines these terms? You’ll find out when you read the full article.
- We’ll warn you about a very real danger. It’s vitally important that you limit your rental, after the principal residence period, to a specific number of years. If you don’t, you won’t qualify for the $250,000/$500,000 exclusion. What’s the magic number? We’ll tell you when you read the full article.