$250,000 Home Rental Exclusion

8/15/2018

There was a time 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, those days are gone!

Today the $250,000/$500,000 exclusion works quite different. You are required to divide your period of home ownership into the following two categories:

Qualified Use: Which means the time you or your spouse uses the home as your principal residence.
NonQualified Use: Which means any period in 2009 or later in which neither you nor your spouse uses the property as a primary residence.

You allocate gain on the sale of your home between the periods of qualified and nonqualified use, and the gain allocated to nonqualified use doesn’t qualify for the $250,000/$500,000 home-sale exclusion.

It is important to note the exception to the nonqualified use is that nonqualified use doesn't include rental use during the five-year period that's after the last date you and or your spouse used the property as your principal residence.

If you will like to discuss this further please don't hesitate to contact us!

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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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