What are the tax benefits of selling an owner occupied duplex?

When you sell an owner-occupied duplex, you can come out ahead of selling a rental-only duplex. Rental properties are subject to capital gains tax and depreciation recapture tax when they get sold. When you sell your house, though, you get to exclude up to $500,000 of the gain from capital gains tax and don’t have any depreciation to pay back.

How is a duplex treated by the IRS?

When you own an owner-occupied duplex, you actually own two different properties from the perspective of the IRS. The half of the property in which you reside is treated just like a house, but the other half gets treated like an investment property.

Which is better a house or a duplex?

The half of the property in which you reside is treated just like a house, but the other half gets treated like an investment property. This seems pretty simple, but when you actually start splitting things down the middle, you might be surprised at how much better off you actually can be.

Can you write off half of expenses on a duplex?

The IRS’s rules let you write off half of any expense that you incur that benefits both your side and your tenants’ side of the duplex. This usually has the impact of effectively letting you deduct a portion of your expenses.

Is there such a thing as a legal duplex?

Legal Duplex. There were a variety of duplexes built in areas that are now only zoned for single-family homes. Zoning laws today would not allow such a structure to be built or rented, but if the home was a duplex before the zoning laws were in effect, then the home is grandfathered as a legal duplex.

Can a duplex be rented out as an ADU?

If there is a permit evidence that it was converted to a duplex after the zoning laws are in effect, it is not a legal duplex and you can’t rent out both units unless you get it authorized as an ADU.

What are the pros and cons of owning a duplex?

Make sure you have enough wiggle room in your budget to pay for repairs and new appliances, and enough time in your schedule to oversee maintenance. Although there are some downsides to living in a duplex, many duplex owners love living in one area of their home and renting out the other half.

Do you need a property manager to manage a duplex?

Managing a larger building generally moves beyond do-it-yourself, requiring hiring a property management company or on-site property manager. Homebuyers and residential investors can use traditional residential lending for buying a duplex, triplex, or fourplex.

How often does an owner occupied home qualify for tax exclusion?

The owner must have used the home for his or her main residence for at least two of the five years before the sale. This exclusion is available to a taxpayer once every two years. In the case of owner-occupied rental property, that portion of the building that was used as the owner’s residence would be proportionately eligible for the exclusion.

When to sell a duplex triplex or fourplex?

When the owner of a duplex, triplex or fourplex lives in one of the units and rents the others, careful tax planning may make a future sale attractive. Individuals and married couples may want to consider whether investment in a smaller rental property in which they would reside in one of the units is a smart idea now and looking ahead.

How much down payment do you need for multi plex?

Here are multi-plex requirements: 1 unit: 15% down payment required 2 unit: 25% down payment required 3 unit: 25% down payment required

How much money can you Make Renting a fourplex?

If you charge each tenant $1,500 per month for rent, then living in a fourplex will provide you $4,500 per month in rental income ($1,500 per month times the 3 units you rent out). It’s also possible to buy a multi-unit property as an investment, or rental, property.

What’s the down payment on a fourplex house?

Owner-occupied fourplexes can also be purchased with a modest down payment of 3.5 percent when utilizing an FHA loan. This type of loan is a government-insured product designed for low- to moderate-income borrowers without significant credit history. Think about it: 3.5 percent of $500,000 is just $17,500.

Is it good to invest in owner occupied multi family?

Investing in owner occupied multi family real estate is a great way for new investors to enter the market. If you’re not ready to purchase a fix and flip property or apartment complex, consider investing in a condo or duplex while renting out half of the unit.