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Turn your home into a tax shelter

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in Small Business Tax,Small Business Tax Deduction Strategies

The home sale gain exclusion for a principal residence is one of the biggest tax benefits on the books. But you can’t claim any tax breaks for a personal home if you sell it at a loss, whether or not it’s your principal residence.

Strategy: Convert your home into an investment property. In other words, hold it out for rent to tenants.

Not only can you offset rental income with rental expenses, you may be able to claim a tax loss when you eventually sell the home. However, as evidenced by a new Tax Court decision, the intent to rent out the place must be legit. (Redisch, TC Memo 2015-95)

Here’s the whole story: When you convert a personal residence into a rental property and then sell it, your basis for tax-loss purposes is

the lesser of the home’s initial ­purchase price (plus any improvements) or the market value on the date of the conversion. For instance, if you bought the home for $500,000, convert it when it is worth $4...(register to read more)

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