From rental to primary home: Uncle Sam takes his cut

Depreciation recapture costs 25%

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

DEAR BOB: Is it necessary to make an Internal Revenue Code 1031 tax-deferred exchange before converting a rental house to my personal residence? Is there some way I can avoid that dreaded 25 percent depreciation recapture tax when I sell it? If I want to claim the $250,000 principal-residence-sale tax exemption, must I occupy it for 24 months and own it for 60 months? --Robert B. DEAR ROBERT: If I understand your question correctly, you already own a rental house that you want to convert into your principal residence. Presuming it was not acquired in an IRC 1031 tax-deferred exchange, you can make it your personal residence at any time by kicking the tenants out (subject to their lease terms, of course) and moving in. Purchase Bob Bruss reports online. To qualify for the Internal Revenue Code 121 principal-residence-sale exemption up to $250,000 (up to $500,000 for a qualified married couple), you must then occupy it at least 24 out of the last 60 months before its sale. Th...