The short answer is yes. You can live in your investment property. But there are tax implications that you need to take into account. If you want to actually rent your investment property to yourself only then read this post.
Can I rent my investment property to family?
The short answer is yes, but you do need to be careful about how you go about doing it so that you can still claim your tax deductions and that you can have a smooth rental process.
What happens when you live in your investment property?
This means that expenses on the property will no longer be tax deductible because it’s now your home and not an investment property. You may be entitled to some capital gains tax exemptions for the period – or percentage of period – that you live in that property as your home.
How to avoid capital gains tax when selling an investment property?
There are several ways to avoid capital gains tax when selling an investment property. These are all legal means to reduce the amount of tax you pay, so it’s within your rights to take advantage of them. Let’s look at five ways to lower your capital gains tax, plus some examples.
How long do you have to live in a house to get capital gains relief?
You lived in the whole property for 15 years and 9 months, then you let it out in full for 4 years and 3 months. You get private residence relief for the time you lived there (15 years and 9 months) plus the last 9 months you owned the property (even though you weren’t living in it), which totals 16 years and 6 months (or 16.5 years).
How long does it take to depreciate an investment property?
Most investment property can be depreciated over a period of 27.5 years, or 3.636% per year. Investors are allowed to use this depreciation to lower their taxable income each year. Unfortunately when you sell an investment property, the IRS gets those savings back in the form of depreciation recapture.
