Leasing out your S&B home?

campigloo wrote:

bigdogger wrote:

campigloo wrote:
P.S. Check into putting the house into a LLC. Not only will it legally protect you, you may be able to take depreciation.

Once you do that, you may lose the ability to take advantage of the IRS rule that allows up to a $500,000 per couple gain on your personal residence to be tax free. Make it a rental property, start depreciating and when you go to sell it you could face literally $100,000s in tax liability, especially if they have owned the home since the 70s. Probably bought it for less than $100,000 and it now is probably worth at least 4 or 5 times that. Have a tax and estate specialist go over all the pros and cons.

Value the house at 100,000 today, take 10 years depreciation, have it valued at 1,000,000 in ten years? Sign me up!

The home is from the 70s. If it cost 100k then, it can easily be worth 600k today. Sell it as your residence, that 500,000 gain is tax free for a couple. Turn it into rental property, that gain may be subject to 20% capital gains tax, 3.8% healthcare passive income tax and state taxes. Also,any depreciation taken is subject to recapture when the property is sold. Depending on an individuals tax brackets at the time, that can cost more than they save. That is an incentive to be very careful.