Is it time to sell my Alaska rental home you ask? Many homeowners over the last few years have opted to rent out their homes rather than sell them as they didn't have enough equity to sell without having to come to closing with a check. For those homeowners that were 'upside down' or 'underwater', as it is commonly referred to, renting the home was an acceptable alternative.
If you have a home in Alaska and are curious about the value CLICK HERE for a fast easy evaluation.
We at Alaska Home Sellers feel that there are a couple of things that you might want to consider. If your goal was never to become a permanent landlord there are some timelines that you don't want to overlook. And if you have lost touch with the current values of homes in the Mat-Su, it might be time to revisit the idea.
For many because they couldn't sell before they moved, they have been forced to rent at their new destination because they had always hoped that there would be equity in their home that they could carry forward to use to purchase their next one. For many that have left the state of Alaska and have moved to the lower 48, they may also want to factor in what the appreciation rates are in their new state to help determine if selling here (albeit not as much as they hoped) might be a good financial move in order to to purchase sooner there. For many that purchased at the peak of the market in Alaska in 2007-2008 and then tried to sell in 2011-2012, they found that their properties hadn't appreciated enough to cover the costs associated with selling. Many then opted to rent it out and cross their fingers and hope that the market would come back. If you have been wondering if now is the time to sell your Alaska rental, it could just be....but more on that shortly.
Did you know that the IRS has specific rules about the length of time that you can be out of your primary residence and still be excluded from a capital gains tax? IRS Publication 523 has a wealth of information that you need to know about if you are one of those homeowners that rented out your home over the last few years. In it there is a section regarding "Ownership and Use Tests" and that is the section that you might want to pay particular attention to. It reads:
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:-
Owned the home for at least 2 years (the ownership test), and
-
Lived in the home as your main home for at least 2 years (the use test).
Example 1—home owned and occupied for at least 2 years.
Mya bought and moved into her main home in
September 2011. She sold the home at a gain in October 2013. During the
5-year
period ending on the date of sale in October 2013,
she owned and lived in the home for more than 2 years. She meets the
ownership
and use tests.
Example 2—ownership test met but use test not met.
Ayden bought a home, lived in it for 6 months,
moved out, and never occupied the home again. He later sold the home for
a
gain in June 2013. He owned the home during the
entire 5-year period ending on the date of sale. He meets the ownership
test
but not the use test. He cannot exclude any part of
his gain on the sale unless he qualified for a reduced maximum exclusion.
The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time.
You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale.
For a homeowner that rented out their home for the last couple of years because they couldn't afford to sell, now could be faced with a capital gains tax on the proceeds of the sale if they have waited too long and no longer can meet the Ownership and Use Tests.
Many homeowners may not have kept a close pulse on the real estate market in Alaska after moving and may not know that property values have been on the increase, and particularly so over the last year. CLICK HERE for a look at Sold vs. List Price. We pulled up 99654 for this example. To find out another area, simply change the zip code to find out info about the area you are interested in.
If you have a home in the Matsu Valley that you have rented out because you were upside down, the environment hasn't been better in years to reanalyze your position and determine if now is the right time for you. If you are getting to a point where time is of the essence, you will also be happy to know that approximately 1/3 of the pending home sales have occurred within 10 days at the moment, as buyers are scrambling to purchase before someone else beats them to it. Take a look at current listing prices here.
If you are curious as to the current value of the property, you can fill out this short form to obtain an approximate idea as to what it's worth.
As it relates to tax matters, we always recommend discussing the tax ramifications with an accountant or other tax professional in order to find out how it will impact you.
