Taxes when a rented home is sold?
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| 1 | Just something I have thought about. I was on the understanding that with previously purchased homes there was a 5yr rule and after that it was not taxed for capital but there is taxes for rental income obviously. Someone I heard who got advice from their accountants and they were told rental homes are still taxed for capital but if it is done after the brightline test it is taxed at their usual tax rate ie a lower rate if they are not usually on the highest income tax rate. They were told it is not their own family home and it was rented out it was thought as their business. OTOH if a house is built up or developed and immediately sold it is taxed at the highest rate. Thoughts on this? rayonline_tm - 2021-06-04 12:22:00 |
| 2 | After the bright line time frame you should be ok, you just have to pay tax on your rental income to the end of the financial year. msigg - 2021-06-04 12:39:00 |
| 3 | That was what I thought but the accountant's view was even after the 5yr brightline test the property is still taxed for capital but at your nominal tax rate ie not that 33% or 40% or whatever it is now. Ie bought for $600k and sold for $1M thus a $400k return. Not sure if some accountants take the conservative measure and given their IRD experience ...... Edit. Hmmm maybe residential are not taxed then, they didn't ask that. Their property they have is a mixed commercial / residential ie a shop in the front with an attached house at the back. Maybe that is the difference ....... Edited by rayonline_tm at 12:58 pm, Fri 4 Jun rayonline_tm - 2021-06-04 12:51:00 |
| 4 | Get a 2nd opinion from another accountant. brouser3 - 2021-06-04 13:01:00 |
| 5 | Don't forget to report depreciation clawback as income. This may be for the building/s, depending on when it was bought, and for chattels. Can be significant. artemis - 2021-06-04 13:23:00 |
| 6 | I believe if you bought the house with the intent of making a capital gain then you can be taxed on the capital gain regardless of how long you’ve owned it, but if you bought the house with the intent of your return on your investment being the rent received and the capital gain is just a happy accident then you aren’t. rowlf - 2021-06-04 20:14:00 |
| 7 | yes investment properties can be taxed as regular income when sold,.. thornton1961 - 2021-06-05 16:04:00 |
| 8 | Highest Capital Gains Tax in the world. pcle - 2021-06-05 16:35:00 |
| 9 | The answer here is “it depends”. So many factors to consider including type of property, time of purchase, intention of purchase (if you intend to make a capital gain its taxable regardless of timeframe), if related parties are builders, subdividers etc (as 10 year time frames apply regardless of bright line) indigojo - 2021-06-06 22:41:00 |
