Rental Rant

[TX_92_Notch]

We're currently selling a house that I bought in 2003. I lived there until 2016 when we moved to our current house. I rented it for 14 or 15 months to one tenant since 2016 (my wife's sister lived there since the tenant moved out, yeah, long story).

My CPA is telling me that I have to pay capital gains tax on the profit because it was a rental property. I believe the capital gains rate is 15% so that's not so bad compared to my income tax rate, but I still can't believe I'm going to pay $12,000 in taxes because I rented the house ONE TIME.

The tenant absolutely killed me on repairs and I might have profited $500 for that year's worth of rent as a result. So renting the house once just cost me $11,500. What a joke.

Taxes

[DON SVO]

So rent was $5,000/month?

[dcs13]

Told my wife we should have divorced so I could claim our rental as homestead before we sold it.. We got our ass raped on capital gains. Fuck the IRS

[smrr1]

So rent was $5,000/month?

Thats what i’d like to know too. Plus would he not be able to show the costs of repairs and the mortgage interest/tax made to help himself out? Is it not 15% of the actual gain/profit after all the expenses?

[Rick Modena]

I was thinking of renting my house so I can move onto the new one, but after hearing this and my realtors horror story, fuck that and renters too.

[TX_92_Notch]

So rent was $5,000/month?

I'm not following where my numbers led to that.

Rent was $1,600/month minus mortgage, taxes, insurance and rental agency I was left with $220 or so per month. The number of repairs this guy requested ate up most of our $220 monthly profit. My net for the year was around $500.

My wife's sister lived there for a while after the tenant moved out so there were no repairs but there was no profit either. She lived there for 'cost'.

I'm still digging into the whole issue and I have a laundry list of questions for my CPA so hopefully I'll be able to drive the taxable amount down considerably.

The $12k number I mentioned above is the result of what the CPA tells me we'll be taxed on. She's basing that on what the house was worth when we rented it compared to what it's selling for now. It's selling for $80k more than we said it was worth when we rented it.

[TX_92_Notch]

We were getting ready to rent the house again and we were going to do it without a rental agency this time to save a ton of money. They charge a month's rent every time they find a tenant and then 8% of rent each month. They also don't question the need for repairs and pretty much do anything the tenant asks.

The kitchen disposal was replaced the first month the guy was there - it was maybe 18 months old at the time. I installed an instant hot water heater at the kitchen sink - same deal, replaced the second month he was there and it was maybe 18 months old. Then there was pest control (why the hell am I paying for pest control if I don't live there?). And on and on.

[TX_92_Notch]

And regarding the tags, it wasn't poor planning. We fully intended to keep this house til we left it to our children when we died. It was going to become a cash cow in roughly 3 years when the mortgage was paid off.

We have an opportunity to buy an amazing piece of property and we don't want to take out a mortgage for it so we opted to sell the rental property instead. Rentals can be replaced. Buying the property with a big pond next door to our current house will only come around once.

[smrr1]

I'm not following where my numbers led to that.

Rent was $1,600/month minus mortgage, taxes, insurance and rental agency I was left with $220 or so per month. The number of repairs this guy requested ate up most of our $220 monthly profit. My net for the year was around $500.

My wife's sister lived there for a while after the tenant moved out so there were no repairs but there was no profit either. She lived there for 'cost'.

I'm still digging into the whole issue and I have a laundry list of questions for my CPA so hopefully I'll be able to drive the taxable amount down considerably.

The $12k number I mentioned above is the result of what the CPA tells me we'll be taxed on. She's basing that on what the house was worth when we rented it compared to what it's selling for now. It's selling for $80k more than we said it was worth when we rented it.

The $5,000/month came from the $12,000 number and the months rented. He and i both were thinking gains from rent i suppose. It all makes more sense to me now. Gains on the house value not the rent.

[fordracing19]

I'm not a real estate guy or a tax guy but I do not understand the gains on a house you owned for so long.

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[akfodysvn]

No capital gains if you lived in the home 2 of the last 5 years.

If that's not the case you will be taxed at long term rates. Only on the amount gained from when you purchased it. You can subtract realtor costs and improvement costs from that as well from what's taxable.

[Broncojohnny]

Get a different CPA

Also, I would “move back into” the house before I sent 11k to the government.

Last of all, the leasing company was fucking you.

[quikag]

No capital gains if you lived in the home 2 of the last 5 years.

If that's not the case you will be taxed at long term rates. Only on the amount gained from when you purchased it. You can subtract realtor costs and improvement costs from that as well from what's taxable.

Listen to this guy. He knows what he’s talking about.

[quikag]

Get a different CPA

Also, I would “move back into” the house before I sent 11k to the government.

Last of all, the leasing company was fucking you.

Listen to this guy too.

[jewozzy]

Get a different CPA

Also, I would “move back into” the house before I sent 11k to the government.

Last of all, the leasing company was fucking you.

This. Your CPA isn't understanding something correctly.