OT: Rental Property Tax Implications

[Penguin]

Having trouble selling our family home in California for a move to Canada. Can someone give me some insight into the tax implications of renting ? For instance, if I sell right now I can take the equity tax free up to $500k. I have heard that if I rent for a couple of years until the market recovers I can only sell the house and pay capital gains, since it is no longer my primary residence. So does anyone know the rules which govern what is a Primary Residence ?

Thanks
Brian

[elmo3]

OH yeah, THIS is where I come for ALL my tax advice.

Yeah, I just blow off the IRS--don't bother even to look anything up--because, after all, we have MRF!

I hear this is THE place for legal advice, also. Oh--and when you need dental advice, don't bother going anywhere else. Right here is where you want to be.

[SDGuy]

Two things I can think of off of the top of my head:
While you're renting it out you MUST depreciate it. Even if you don't claim depreciation, Uncle Sam will assume you did (this affects your cost basis of the property).

To claim the $500K, the house must have been your primary residence for two of the past five years prior to the sale - which means you can rent it out for just about three years, but it must be sold before that magic deadline passes http://www.taxguru.org/re/primary.htm

Those are the two major things I can think of at the moment.. (Insert standard disclaimer about how I'm not a tax professional here)

[Dick Moore]

So the having to live in it for two years out of last five can be a problem. But I have to say that renting our two houses by long distance (we in the NE and WA, the houses in AR) was a supreme hassle during renter changes, even with a property manager, the tax savings we got, even with depreciation, really helped us over a big hump. You really should get some professional CPA help on this, especially since you're moving out of country.