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Suppose that you list your house for sale and it sits and sits for months on end without any offers. You need to move, and because you're not Bill Gates, you can't afford to leave the house vacant while you're making your mortgage payments, paying property tax and insurance payments, and simultaneously shouldering the cost of renting or buying another home. So, you decide to rent out your difficult-to-sell house for a number of months while still on the market.
If you cease seriously trying to sell your house while renting, the IRS deems that you've converted your home into rental property, and you owe capital gains tax unless you buy a replacement rental property. If you have any doubts about running afoul of the tax laws, please consult with a good tax advisor.
- Keep Copies of the Closing and Settlement Papers
- Keep Proof of Improvements and Prior Purchases
- Stash Your Cash in a Good Money Market Fund
- Double-check the Tax Rules for Excluding Tax on Profits
- Cast a Broad Net When You Consider Your Next Home
- Remember That Renting Can Be a Fine Strategy
- Reevaluate Your Personal Finances When Things Change
