Sell Your Rental House to Get a Good Deal – The Factors to Keep in Mind

People who have a rental property will want to sell it one fine day! The reasons for this can be personal and capital driven. It could be that you wish to change location and sell the rental house so that you don’t have to return to the city you are presently living in and also make good use of the money you can get from.

There are several companies that can enable you to sell your rental property. Today, there are house buyers for any scenario from where you can get the necessary help and guidance. However, as you take their help, here are a few essential pointers that you need to keep in mind:

 

It would help if you didn’t get fooled by the heavy capital gains taxes

When you wish to sell the house that is your primary residence, the benefit is that you get from the sale is generally the tax fee. Usually, you can have an amount like $250,000 if you are single and approximately $500,000 when married without owing the sales taxes until you have owned the house for almost two years and resided in it for the past five years.

But you must know that the IRS doesn’t expand such gains. It could be that your rental property has increased in value over time, leading to a capital gain, which is the profit you earn when selling any other residential property. But because you are renting this property instead of living here, you might not qualify for the use test of capital gains exclusion. It means the profit you make will get subject to tax.

You should defer the capital gains taxes using the 1031 exchange

It could be the time for unloading a poor-performing rental property in a declining neighborhood. However, you might wish to see whether you have any scope in the upcoming areas. When you have opted in for the 1031 exchange, you probably can sell it to the property and, after that, purchase another similar property with increased earning potential. You should ensure that you don’t have to pony up for the capital gains tax.

It would help if you lived in the rental prior to selling

For people who don’t wish to make use of the 1031 exchange for parlaying the profit to a similar property, there is another choice for moving inside the rental home. Till such time you reside in it for close to two years, you can pass the IRS use and ownership tests, for which you need:

  • To own the house for close to two years
  • Reside in that house as your primary house for close to two years

Once you pass these tests, it becomes possible for waiving the capital gains taxes for as much as $250,000 or $500,000. But just in case the rental property doesn’t prove to be a good investment, it is a wiser decision to unload it currently to cut away the losses.

These are some of the factors that you must keep in mind to ensure that you can sell the rental property you own without any hassles.

 

Leave a Reply

Your email address will not be published. Required fields are marked *