[Carla B]

Originally Posted by Wondering

My understanding, for IRS, is if the house you are buying cost more than the house you sold there is no capital gains jeopardy. I would think Florida tax would be the same.

A far as I know, there is no Florida tax. For complicated matters I also like the idea of an Enrolled Agent. However, we had a situation of selling our former residence-turned-rental property in 2012 and I filled out the tax return and required forms myself. Never heard a peep about it from the IRS.

[Babubhat]

Answers here are incomplete. A conversion from rental property to residence has multiple steps to calculate the correct taxation of the transaction. Read professional analysis previously cited or pay for professional help. Tax software is another alternative. You are responsible for your return. Code, regulations, case law is all the IRS wants to hear about support for the tax treatment on the return

Deferral of a gain is a different more complicated issue.

A special rule enacted in 2008 requires the proration of gain on the sale of a personal residence that was initially used other than as a personal residence. See link below

Tax Issues When Converting a Rental to Your Personal Residence | Professional Tax Services

[Haggar]

Originally Posted by Lisa22

Can anyone give me a quick and dirty refresher? Here is my circumstance: Bought a CV in December 2020. Rented it for two years, then became a FT Florida resident and have lived in TV since 2023. Filed Federal and State taxes for 2022 in another state.

If we sell and buy another property here, I understand that there is no Florida Capital Gains tax but the Federal Capital Gains tax still applies. However, in Florida the rules are that one must own the property AND be a Florida resident for at least two years to avoid any Capital Gains? I do know to take the sale of the property and add any expenses due to updating the property in order to calculate the left over equity for which I will have to pay taxes. Capital Gains are also dependent upon income level as well.

Am I correct or can someone correct me on any of the above? Thank you in advance.
We do not have a Trust set up in Florida yet - should we do that first? We would like to sell/buy in the very near future.

-Lisa

First - no FL tax - though it you lived in another state in the year you sold the property the gain may be taxable there.

The federal exemption for a gain applies if you live in a primary residence in two of the past five years prior to the sale. You said you moved here in 2023 so the exemption doesn't apply yet.

If you had a loss on the property in the years you rented it and could not take the loss because of passive activity rules you would be able to take the accumulated loss in the year of sale.

If you were selling this as a commercial property and buying another commercial property to defer the gain you could use Section 1031.

Gain on the sale is based on the cost of the property (including certain costs) less depreciation taken against the net sales price (after expenses).

I'm a CPA - if you want to give me a call my number is 561-968-8571.

[Haggar]

Originally Posted by Lisa22

Can anyone give me a quick and dirty refresher? Here is my circumstance: Bought a CV in December 2020. Rented it for two years, then became a FT Florida resident and have lived in TV since 2023. Filed Federal and State taxes for 2022 in another state.

If we sell and buy another property here, I understand that there is no Florida Capital Gains tax but the Federal Capital Gains tax still applies. However, in Florida the rules are that one must own the property AND be a Florida resident for at least two years to avoid any Capital Gains? I do know to take the sale of the property and add any expenses due to updating the property in order to calculate the left over equity for which I will have to pay taxes. Capital Gains are also dependent upon income level as well.

Am I correct or can someone correct me on any of the above? Thank you in advance.
We do not have a Trust set up in Florida yet - should we do that first? We would like to sell/buy in the very near future.

-Lisa

it amazes me how much advice is given by people on this site when an request is made for legal or tax advice who are guessing and don't really know the answer. If you want legal or tax advice go to a professional in these fields. What applied in one set of circumstances may not apply to the poster's situation. This inquiry needs more info to provide a correct answer or provide alternative ideas. You're all trying to be helpful but if you don't know the answer ....

[Babubhat]

Facts and circumstances are unique to each transaction.

[Lea N]

Originally Posted by BrianL99

As other have said, consult a CPA.

The post quoted, is very relevant. I recently sold some property, including a personal residence and trust me, the supposed 15% Long Term Capital Gains Tax (under $492,301) turned out to be way closer to 20%, plus a major increase in Medicare costs.

Can you tell me if this is a permanent increase?

[Driller703]

Originally Posted by PersonOfInterest

I would 2nd the recommendation for an Enrolled Agent vs. a CPA or Attorney. The reason for this recommendation is that EAs (enrolled agents) are usually only involved in Tax matters and are required to attend education concerning Taxation. CPAs are more likely to be involved in small business and other business and personal financial matters and their education covers a broad spectrum of accounting. Attorneys are involved in all types of legal matters unless they are a Tax attorney. If they are a Tax attorney their interest would be in Tax Court cases and not personal taxation. It is possible that a CPA or Attorney would deal only with Tax matters, but its not likely.

From what was described you will have Depreciation recapture and you will have Federal capital gains. You cannot escape the depreciation recapture, but if you live in the house for 2 years or more as your personal residence you may escape the federal Capital gains. You would be well advised to check with an EA or other tax professional.

What is an “enrolled agent”, and how do I locate one.
Thanks

[Sully]

........

[Bridget Staunton]

The 1031 exchange you have to identify your new property within a short time & also close within a limited time. Check the laws

[manaboutown]

Originally Posted by Haggar

it amazes me how much advice is given by people on this site when an request is made for legal or tax advice who are guessing and don't really know the answer. If you want legal or tax advice go to a professional in these fields. What applied in one set of circumstances may not apply to the poster's situation. This inquiry needs more info to provide a correct answer or provide alternative ideas. You're all trying to be helpful but if you don't know the answer ....

Thank you for this observation. I could not agree more.

While responding posters's advice appears to be well intended a number of the posts are replete with dangerous misguidance including an ill-informed recommendation based on out of date tax law that no longer applies. I use dangerous in the sense that a return could likely be red flagged by the IRS as obviously incorrect. An audit would mean costly penalties, interest charges and possibly professional fees. I encourage the OP not to be pennywise and pound-foolish. Seek professional assistance before filing a tax return.

The OP's situation requires professional guidance as several issues present themselves. It is not a simple yes or no. Although little information was provided it certainly was sufficient to indicate a tax professional should be consulted, a CPA or a registered agent. I doubt a tax attorney is needed.

[Carla B]

Originally Posted by Driller703

What is an “enrolled agent”, and how do I locate one.
Thanks

An Enrolled Agent is a person who has passed a comprehensive exam in tax matters and has been awarded the highest credential by the IRS. Ellen Cronin in Oxford is such a person.

[petsetc]

Originally Posted by Carla B

An Enrolled Agent is a person who has passed a comprehensive exam in tax matters and has been awarded the highest credential by the IRS. Ellen Cronin in Oxford is such a person.

Also, if you look at HR Blocks, several of their people in this area are Enrolled Agents, and that will be stated in their bios.

I had a friend at Block where I worked when I first retired. He was an Enrolled Agent and was the contract provider for TurboTax users when they got audited.

I know many people don't like HR Block, but as a former part-time preparer for them, my experience was, in general, you got great service.