home ownership and student status

[jhrebik]

What is the name of your state? VA

My question is three-part, the first is:

When selling my home last year, which I had essentailly re-rented to a friend until I knew I wasn't moving back and she decided to purchase, I had to answer a series of questions. I answered "yes" to all of the typical questions except this one: "No portion of the residence has been used for business or rental purposes by me....." Essentially, she was a "room-mate" but she covered the mortgage payment while I worked out of state. Am I going to be non-exempt as far as the IRS is concerned?

Furthermore, on a different issue, what is the legal (or IRS) definition of "principal residence"????

And finally, I have been enrolled as a student at least half of last year, and am aware of certain tax credits. However, I obtained my financing through loans, which won't be payable until I graduate. What is the best tax method for claiming deductions???

Thanks y'all!!!!

 

[abezon]

Under section 121 of the Internal Revenue Code, you do not have to pay capital gains tax on the profit from the sale of your principal residence if you lived in & owned it for 2 of the 5 years before it sold. However, the sec 121 exclusion does not apply to "section 1250 gains", which is the depreciation you have claimed since 5/1997. If you only rented the place casually & did not claim depreciation, you can exclude all the gains. The burden is on you to prove that you never claimed depreciation on the house, so be sure to keep copies of all tax returns filed since you bought the house to show this.

You need to declare the rent she paid as income & claim expenses on Schedule E. Don't claim depreciation.

Principal residence is the home where you spent most of your time.

You claim the credits in the year you pay the tuition & fees, whether the tuition & fees are paid by you, by loans, or by a third party. If you received scholarships or grants, it's more complicated.