If I convert a primary residence to a rental, are the cost of improvements potentially lost?
What is the cost basis of a home converted to rental?
The house originally cost $ 200,000. Its FMV was $135,000, when it was converted to a rental. Over the 5 years $10,000 in depreciation was taken.
Converting a Personal Residence to Rental Property.
| Original Cost | $200,000 |
|---|---|
| Basis for tax gain (line 1-line 3) | $190,000 |
| Net Sales Price | $105,000 |
| Tax Loss (excess of line 4 over line 6) | $20,000 |
How do I avoid capital gains tax?
How to Minimize or Avoid Capital Gains Tax
- Invest for the long term. …
- Take advantage of tax-deferred retirement plans. …
- Use capital losses to offset gains. …
- Watch your holding periods. …
- Pick your cost basis.
What expenses can I claim against a rental property?
So what are the allowable costs against rental income?
- Finance costs (restricted for most residential properties) …
- Repairs and maintenance. …
- Legal, management and accountancy fees. …
- Insurance. …
- Rent, rates and council tax. …
- Services. …
- Wages. …
- Travelling expenses.