Two Family House Sale Question

The rental part and the personal residence part are taxed differently and have to figured separately and then combined. Part of the gain on personal residence is not taxed, and all of the gain on the rental side is taxed. But you have to figure your adjusted basis (cost) on BOTH sides. Start by making a list of all capital improvements done on the personal part. Depreciation you’ve taken on the rental part gets recaptured and added to your basis. You have to figure the two levels of transfer tax and broker’s fee and they come off the top.

I can help you with this if you want, it’s good to do a projection to see what you would walk away with when all is said and done based on different scenarios. Feel free to contact me if you like.

good luck!

raphael9

in Real Estate - Sales 13 years and 8 months ago

7

Please log in, in order to post replies!

7 replies

Newest Oldest

anonymous | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4940 (8) {
  ["data"]=>
  object(stdClass)#4931 (12) {
    ["ID"]=>
    string(4) "3470"
    ["user_login"]=>
    string(9) "anonymous"
    ["user_pass"]=>
    string(0) ""
    ["user_nicename"]=>
    string(9) "anonymous"
    ["user_email"]=>
    string(16) "deviatar@alm.com"
    ["user_url"]=>
    string(0) ""
    ["user_registered"]=>
    string(19) "2007-09-27 13:11:05"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(13) "loser spammer"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3470)
  ["caps"]=>
  array(0) {
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(0) {
  }
  ["allcaps"]=>
  array(0) {
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

We’re thinking about selling our 2-family house in the spring. We would like to have a broker come and look at the house and give us an honest estimate of how much they think we could get for it. Can anyone recommend a good broker (we’re in the southwest corner of Park Slope)?

I’m also having a hard time trying to figure out how much the sale of the house will cost us. I know the brokers get 4-6% but I’m not clear about the taxes and other fees. An accountant (who is not our accountant) told me that you have to pay a large amount of tax on the income from the rental but we claim that income on our taxes each year so I’m not sure if that’s accurate.

Thanks.

denton | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4941 (8) {
  ["data"]=>
  object(stdClass)#4942 (12) {
    ["ID"]=>
    string(4) "6430"
    ["user_login"]=>
    string(6) "denton"
    ["user_pass"]=>
    string(34) "$P$BSAsa2zDu3dNJzZDLdlOs804lQec9t."
    ["user_nicename"]=>
    string(6) "denton"
    ["user_email"]=>
    string(20) "denton@speakeasy.net"
    ["user_url"]=>
    string(21) "/forums/users/denton/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:13:45"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(6) "denton"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(6430)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

I’d suggest Alyssa Morris at Corcoran… Alyssa.Morris@corcoran.com

I believe (but I am not an acct) that rental income is Sched E income. However you can deduct pro-rated expenses for that apt against the rental income.

slopegirl | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4945 (8) {
  ["data"]=>
  object(stdClass)#4939 (12) {
    ["ID"]=>
    string(5) "34682"
    ["user_login"]=>
    string(9) "slopegirl"
    ["user_pass"]=>
    string(34) "$P$BmPjvLLXxuJIHCzkqN9h9/FLl7akcD."
    ["user_nicename"]=>
    string(9) "slopegirl"
    ["user_email"]=>
    string(21) "sarah_11215@yahoo.com"
    ["user_url"]=>
    string(24) "/forums/users/slopegirl/"
    ["user_registered"]=>
    string(19) "2017-08-10 13:49:17"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(9) "slopegirl"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(34682)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

I think DIBS can set this straight, but I think income from selling a house is capital gains tax, and I think that rate is 15% in 2011 (Bush tax cuts dropped it from 20%). I think also you have a one time exemption of $250,000 per person. I don’t know why rental would be separate issue since you are selling the building. I am certainly NOT an accountant either. We just sold an apartment, not  building, and that’s what I remember from that transaction.

Jesse Temple is a GREAT broker and close to you at 8th ave/13th street in south slope. Phone 347-725-3370\. Temple Morrow Group. He’ll be flexible on commission if you’re realistic about price. Worked very well for us… He sold our PS two bedroom in about 4 weeks in 2009\. We negotiated good price and he’s very open to working with other brokers, which is the most important tool to getting property sold fast.

callalily | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4940 (8) {
  ["data"]=>
  object(stdClass)#4938 (12) {
    ["ID"]=>
    string(5) "56059"
    ["user_login"]=>
    string(9) "callalily"
    ["user_pass"]=>
    string(0) ""
    ["user_nicename"]=>
    string(9) "callalily"
    ["user_email"]=>
    string(26) "moparbrownstoner@gmail.com"
    ["user_url"]=>
    string(20) "/forums/users/mopar/"
    ["user_registered"]=>
    string(19) "2017-08-10 13:38:12"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(9) "callalily"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(56059)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

Rental property is taxed differently than residential property. However, I’m not sure how it works with a two-family, since you are living in the building and it’s not commercial property.

rh | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4941 (8) {
  ["data"]=>
  object(stdClass)#5113 (12) {
    ["ID"]=>
    string(4) "3878"
    ["user_login"]=>
    string(2) "rh"
    ["user_pass"]=>
    string(34) "$P$BL48JCuNvr9CIMtn9XLzqcR6qYGkGS1"
    ["user_nicename"]=>
    string(2) "rh"
    ["user_email"]=>
    string(22) "info@reclaimedhome.com"
    ["user_url"]=>
    string(27) "https:www.reclaimedhome.com"
    ["user_registered"]=>
    string(19) "2017-08-10 14:12:47"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(2) "rh"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3878)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

Hey Zote,

Can you email me at infoATreclaimedhomeDOTcom or put your info up here so I can contact you? I’m an agent…not looking for your listing… but I’m acting as a buyer’s agent for someone looking in that area if you think you would be ready to show at some point soon. Thanks!

daveinbedstuy | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4945 (8) {
  ["data"]=>
  object(stdClass)#5114 (12) {
    ["ID"]=>
    string(4) "3864"
    ["user_login"]=>
    string(13) "daveinbedstuy"
    ["user_pass"]=>
    string(34) "$P$BtJYyObAQmff2MQp.qFP7/kmwU1bBZ1"
    ["user_nicename"]=>
    string(13) "daveinbedstuy"
    ["user_email"]=>
    string(19) "djl135e54@yahoo.com"
    ["user_url"]=>
    string(55) "http://bstoner.wpengine.com/forums/users/daveinbedstuy/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:23:53"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(13) "daveinbedstuy"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3864)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

The rental part of the gain or loss will be taxed separately from the owner’s unit. Depreciation applies to the cost basis of the rental unit and you will have to pay cap gains tax on any gain.  This is assuming you were able to declare and use the yearly accounting loss or gain against your income every year (if you made less than $150k in ordinary income).

For one person, the $250k offset applies to any gain of the owner’s unit only ($500k for a couple).

If any of this isn’t clear, ask me some other specific questions.

housepoor | 13 years and 9 months ago

string(1) "1"
object(WP_User)#4940 (8) {
  ["data"]=>
  object(stdClass)#5116 (12) {
    ["ID"]=>
    string(5) "71781"
    ["user_login"]=>
    string(9) "housepoor"
    ["user_pass"]=>
    string(34) "$P$BZnN5ER9y5nTOH3g4Irm1FYCyvGA2Z1"
    ["user_nicename"]=>
    string(9) "housepoor"
    ["user_email"]=>
    string(25) "jonathanscooper@gmail.com"
    ["user_url"]=>
    string(24) "/forums/users/housepoor/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:30:00"
    ["user_activation_key"]=>
    string(45) "1728671304:$P$Bek7XOwNZX.3S.lAqmzW5.6CejI0ah/"
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(9) "housepoor"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(71781)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

I am not an accountant, but I believe that recovery of depreciation is taxed at 25%. Lets assume the house was worth $1,000 and for tax purposes you’ve been allocating 1/2 to the rental part of the property (you should have been declaring rental income/expenses/depreciation on your schedule E), and you’ve depreciated $150 over the years. You sell for $1,400, allocated $700 to you residence (to which you apply the Federal owners gain exemption) and $700 to the sale of the rental. Your basis in the rental started at $500 and fell to $350 after depreciation. Your gain is $350, the first $150 is depreciation recovery (and taxed at 25%), the remaining $200 is capital gain, taxed at 15%. Also, remember there are NYC/NYS taxes. I don’t believe there is a capital gains tax preference in NYC/NYS, so it will probably be taxed no differently than ordinary income (about 10% all-in) on the gains from the residential and the rental portions. I don’t know if there is a higher rate in NYC/NYS on the depreciation recovery. There are transfer taxes too — but I don’t know which are paid by the seller, which by the buyer. Good luck!