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News Archive: Ask the Professional - I am considering selling a rental property. How do the tax law changes affect me?
 For Immediate Release:
December 26, 2008
John McGovern, Tax Senior
jmcgovern@rina.com • (415) 777-4488
120 Montgomery Street, Suite 2075
San Francisco, CA 94104
www.rina.com
Q. I am considering selling a rental property. How do the tax law changes affect me?
A. The Housing Assistance Tax Act of 2008 reduces the $250,000/$500,000 capital gains exclusion for any rental/investment property use, termed “non-qualifi ed” use, beginning January 1, 2009.
The provision requiring the owner to maintain residency for 2 of the 5 years preceding the sale remains in effect.
Say you have owned and rented a second house since 1991. In January 1, 2012, you move
into the rental and subsequently sell on January 1, 2014.
You determine your capital gains exclusion based on the following:
Period of qualified use as primary residence: 2 years (1/12-1/14)
Period of non-qualified use as rental, beginning 1-1-09, 3 years (1/09 - 1/12)
Percentage of qualified use to total time period: 40% (2 years divided by 5 years)
You are eligible for 40% of the exclusion, or $100,000/$200,000.
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