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Financial Information for Senior Military Officers

Movin' Back Into Your Rental? Hold on There Partner!

Movin' Back Into Your Rental?  Hold on There Partner!
I think most home owners are aware of the 2 out of 5 rule when it comes to selling your primary residence.  For those who aren't, the rule basically states that if you lived in your house for 2 of the last 5 years (there is an extension for active duty military) you can exclude $500,000/$250,000 (Married/Single) of Capital Gains from your income.  That means no taxes. 

When you look at that you might get the idea that you can move back into your rental house for two years and sell it and not pay taxes.  You'd be wrong on two accounts. 

First of all, you have to pay taxes on any "depreciation recapture" (not the topic of today's article).  You also have to pay taxes on gains attributed to "nonqualified use".

So, what is nonqualified use?  Here is what the IRS says:

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