will selling my house and renting be a huge tax liability?

CeciGirl: will selling my house and renting be a huge tax liability?
I have 3 kids and my husband and I are trying find a way for me to quit working to be a stay at home mom. The only way we see that it will be possible, is to lower our overhead by selling our huge house and downsizing.

My question is, how hard will we be hit during tax time because of this? Since we have always had the interest to claim on our taxes we have always gotten money back and this year we added another baby, but I am unclear as to how “renting” and not “owning” will affect us.

Answers and Views:

Answer by bostonianinmo
Without knowing the size of your interest deduction, your total itemized deductions, and your total income, it’s not possible to give you any kind of estimate of the tax impact.

Answer by ninasgramma
I would need to see last year’s tax return to determine how much tax benefit you received from the mortgage interest and real estate tax deductions.

In most cases, the tax benefits of the mortgage interest deduction and real estate taxes are overrated. Only the itemized deductions in excess of $ 10,300 do you any good.

If you could downsize to a less expensive home that you purchased, you may retain tax benefits and reduce expenses.

If you choose to sell your home and rent, do a mock tax return for next year to see the results, then go ahead knowing what the impact will be.

Answer by jeff410
If its a huge house, and you have a lot of equity you dont have to pay taxes on the first $ 500,000 in gain on the sale. So it seems like that profit now may be better than writing off interest on the original cost. at whatever your tax rate is.. A dollar now is worth more than a dollar later. As to renting I dont know if that would be a good idea. It might be better to use the money to buy a smaller house.

Answer by John M
To be exempt from capital gains tax, you must have resided in the home for at least two years… What about purchasing a smaller home? Renting removes any tax deductions that you were receiving for the mortgage on your house… However, you truly need to consult a tax professional with all of your tax information to get a clear picture as to what you would be looking at.

However, if you click on the below link, you can find a way to get your tax expenses paid for this year…