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04 May 2006 @ 06:13 pm
Talked to my tax guy today about selling my house. He doesn't know exactly how the "having a housemate" thing affects taxes on selling my house either, but at least *he* is competent to look it all up :-)

Talking about several different strategies with regard to housing. I should talk to a realtor anyway, just on principle, but it seems like it's only extra work and annoyance... At least, until I'm pretty sure what I want to *do* exactly.

It isn't really purely extra annoyance. It just feels that way.
Anthonyterpsichoros on May 5th, 2006 02:00 am (UTC)
My semi-informed guess is that having a housemate should not affect taxes on proceeds of the sale of the house (which are tax-free up to $250,000 profit), because you were living in the house yourself. However, as I understand it, you should have reported rent received from your housemates as income, though you get to offset some percentage of your maintenance/repair expenses for the house because they benefitted your housemates/tenants as well as you.

Of course, go with the advice you get from the person who is paid to do it (and has professional liability insurance).
remington012 on May 5th, 2006 02:59 am (UTC)
Hrm...? The tax guy I spoke with said that I most certainly would not and should not have to report rent received from housemates as income. He claimed that it was simply "sharing living expenses". (Then again, that was under the pretense that the entirety of the housemate's rent was less than the monthly mortgage payment, and hence I wasn't profitting from it -- perhaps that changes once you own the house?)
The Water Seeker: houseplymouth on May 5th, 2006 03:04 am (UTC)
Then again, that was under the pretense that the entirety of the housemate's rent was less than the monthly mortgage payment, and hence I wasn't profitting from it -- perhaps that changes once you own the house?

It certainly does change, since when you own the house that money goes into equity, which is in fact a sort of profit. House owner gets equity, non-owner housemate does not.
Anthony: moneyterpsichoros on May 5th, 2006 03:28 am (UTC)
If you're sharing a rental, and you collect the money to pay the landlord, you're not actually receiving "income" from the housemate, you're merely passing on the housemate's share. (If the housemate is paying a share of the rent that's significantly larger than the share of the unit he's receiving, then you might have to report the difference as income.)

It's different when the housemate is not a part-owner. According to IRS Pub 527, "If you use a dwelling unit as a home and rent it 15 days or more during the year, you include all your rental income in your income." The rules get complicated when it comes to deductions for rental expenses if you also use the property as your home, but the quoted statement is pretty definitive, and is repeated a couple of places in the Pub.

Looking at IRS Pub 523, since the rent was reported as income, *and* the part that the housemates occupied is not a "separate part" of the house, angelbob should be able to exclude the gain (Up to $250,000), except that if he claimed any depreciation (after May 6, 1997), the gain up to the amount of depreciation claimed is *not* sheltered.
Noahangelbob on May 5th, 2006 03:32 am (UTC)
Yeah. I didn't fully understand the depreciation stuff -- that's part of what I'm hoping he'll be able to explain to me.

If you're right on this, though, then it sounds like it mostly won't be a huge deal and things will work out fine.
Anthony: moneyterpsichoros on May 5th, 2006 03:42 am (UTC)
Depreciation is complicated, but in this case, the main issue is whether you actually claimed any while you've owned this house.

If no, then you don't pay taxes on the first $250,000 of your gain. If your gain is going to be more than $250,000, then you can try to "adjust the basis" (by showing that you've paid to make permanent improvements) to lower your gain.

If you *have* taken a deduction for depreciation, the way I read the pub, you get to report the depreciation, up to the amount of your gain, as income in the year you sell. So if you claimed $3000 depreciation in each of the past 5 years, you'd report $15,000, unless your gain was less than that. I strongly suspect that the actual gain you'll realize on your house will be significantly more than any depreciation you might have deducted in previous years.
Noahangelbob on May 5th, 2006 03:45 am (UTC)
Yeah. The figure Mark mentioned for total depreciation was about $15k. I've also made some improvements, but I have no idea if I've already claimed some previous tax advantage on them. Mark had asked about 'em before at the very least.
Ethan Frantzef2p on May 5th, 2006 03:55 pm (UTC)
IANATL but I did go through the same thing you are going through. I owned the home, lived in it and rented rooms. I was a good boy and decleared my income every year. Since my total gain was significantly less than the $250,000, I only paid taxes on the amount that I had depreciated while renting rooms. I actually had my taxes reviews by H and R Block that year. They said I did the right thing.
Noahangelbob on May 5th, 2006 05:00 pm (UTC)
Nice! Sounds like that's what'll happen to me, then.
Noahangelbob on May 5th, 2006 03:09 am (UTC)
I did report the money from housemates as income, in fact. Been doing that for awhile.
Krissyrightkindofme on May 5th, 2006 02:20 am (UTC)
Well, at least you took this step today. :)
Noahangelbob on May 5th, 2006 03:11 am (UTC)
Yup :-) I'm doing three or four things like that right now... Gonna be annoying and take awhile, but at least I'm started.

Along the same lines, I'm gonna start calling realtors shortly, even though I'm still not sure how to even *start* choosing between 'em.
Krissyrightkindofme on May 5th, 2006 03:30 am (UTC)
You could always do it how I make decisions about life partners, "Ok--who's cutest?"
Noahangelbob on May 5th, 2006 03:43 am (UTC)
Taliasooperspryte on May 7th, 2006 04:59 pm (UTC)
funny, that's how I choose which team to root for when watching a sporting event that I don't care about.
Krissyrightkindofme on May 7th, 2006 05:26 pm (UTC)
I have to be tied to a chair in order to watch a sporting event so it isn't as much of an issue then cause hey... I'm tied up. I care even less about who is playing. :)
Anthony: interrogating textterpsichoros on May 5th, 2006 03:33 am (UTC)
I found out a lot about realtors by talking to them at open houses. Ask difficult but reasonable questions about the property you're showing. (Insurance and association fee details for condos are good for this.) The ones who have answers, or who know where to look up the answer rather than bullshitting you, are the ones to go with. In my experience, only about 20% of realtors will inspire any confidence.
Davidtsgeisel on May 5th, 2006 07:55 am (UTC)
The tried and true method is to ask friends, neighbors, strangers on the street, random phone callers, etc, if they have any realtor recommendations.
Bobailurodragon on May 5th, 2006 09:59 pm (UTC)
I recommend my mother. ;-)

Sadly, she is in Modesto.

But she might have a contact out here.
VanderVeckenxthread on May 5th, 2006 08:19 am (UTC)
So, I'm still trying to get my head around the initial memo.
What is leading you to want to stop being a Bay Area property owner?
Noahangelbob on May 5th, 2006 03:17 pm (UTC)
My current opinion of the real estate market here. My desire to sweep my winnings off the table and put it into something where I care less about price fluctuations.
msde on May 5th, 2006 04:00 pm (UTC)
Are you planning on living in roughly the same area once you sell?
Noahangelbob on May 5th, 2006 05:00 pm (UTC)
Roughly, yeah. Maybe peninsula or south bay rather than southeast bay.
msde on May 9th, 2006 11:52 pm (UTC)
Out of curiousity, have you considered having work done on your house to increase its value before you sell? My fiancee is in one of the smaller houses in her neighborhood, but we're deathly afraid of doing anything in case it triggers a reassessment more than the annual 2% she's been getting.

Of course, this means entering contractor hell.
Noahangelbob on May 10th, 2006 12:14 am (UTC)
I'd consider it - in fact, answering that question is the biggest value I see a realtor contributing to the whole process. For instance, my carpet could probably use replacing.

In my experience, Fremont contractors are awful. But I'm guessing that the realtor will *also* have dealt with some contractors that do whatever work they're recommending.

So yes, possible, but the details will depend (I hope) on the realtor that helps me sell.
msde on May 10th, 2006 08:59 pm (UTC)
Down here, the biggest factor in relative house price in the neighborhood seems to be square footage. Don't know if that's relevant to you, but there it is. The expansion also tends to help distinguish the house from looking like every other house on the block.