how to avoid rental property sale tax?
I have a leasing property which was converted from my primary residence. I plot to rent it out for a long time. So by the time that I want to sell it (probably many years later), can I go back to the house to converted it back to primary residence to avoid the tax? can I just leave it empty (noy go in it) for 2 years to avoid the tax?
Nope, you can’t avoid tax even by converting it back into your primary residence. You’ll have to pay tax on the depreciation that you would have taken even as the property was a leasing. That you can’t avoid. As far as the primary residence rule goes, you can avoid tax on gain up to $250,000 if single, and $500,000 if married, if you have owned and lived in the home for 2 out of the previous 5 years. But even that rule doesn’t exclude the gain on depreciation recapture.
It’l only carry capital gains tax for the time it was a leasing property, not the time as a personal residence.
If you depreciate the property as a leasing then when you convert back to a primary residence you have to add back all the depreciation. You must live in it for 2 of the last 5 years. You certainly need to see a tax planner for that.