Selling a rental property

[McEntee]

California. I have lived in my property for two years and am thining about renting it. If I do rent it will I have to pay more taxes when I sell because it is now a rental property or beacuse I lived there for two years am I exempt of this tax

[divgradcurl]

Originally Posted by McEntee

California. I have lived in my property for two years and am thining about renting it. If I do rent it will I have to pay more taxes when I sell because it is now a rental property or beacuse I lived there for two years am I exempt of this tax

You should probably repost this on the tax forum. However, I believe that so long as you have lived in the house as your primary residence for 2 of the last 5 years, then you can exempt $250,000 from taxes, and whether or not you rented it or let it sit idle for the other 3 years is irrelevant.

You have to pay taxes on the rental income, though!

[FlyingRon]

You also must depreciate the property and you must recapture (at a special rate) the depreciation when you sell. DGC is correct in that the capital gain exclusion applies if you lived in the house as a primary residence for 24 out of the 60 months that precede the sale.