capital gains - Posted by arelene castorina

Posted by Dave T on October 22, 2000 at 22:10:43:

Let’s say you buy a SFR for $35000 to use an an investment rental. After three years, the market demand for property similar to yours has caused a significant appreciation. You decide to sell the property for $50000. Your capital gain on the property appears to be $15000 and this profit is taxed at a 20% capital gains rate.

Since you used the property as an investment rental, and should have taken a depreciation expense during your investment use, the actual cost basis in that property is reduced by the amount of depreciation taken (or the depreciation you should have taken, whichever is greater). For the sake of illustration, let’s say that you allocate $7500 of your $35000 purchase price to the value of the land and $27500 to the value of the building. Now during your three years of investment use, your straight line depreciation expense should have been $3000 or $1000 per year.

Your cost basis is now $32000 (purchase price minus depreciation), making your taxable profit on the sale of this property $18000. Now you can readily see that $15000 of your profit is due to market appreciation (20% capital gains tax rate), while $3000 of your profit is due to the depreciation taken. The $3000 of profit due to depreciation is taxed at the depreciation recapture rate of 25%.

Hope this helps answer the question.

capital gains - Posted by arelene castorina

Posted by arelene castorina on October 21, 2000 at 19:54:58:

does anyone know how much money i would have to pay in new york in capital gains if i made a profit of 100,000 on my house? thanks

Re: capital gains - Posted by Rolfe Kurtyka

Posted by Rolfe Kurtyka on October 21, 2000 at 22:45:37:


If the home has been your primary residence for two of the last five years, and you have not taken any depreciation for a home business, you may owe no federal capital gain tax. Gains up to $250,000 (single) or $500,000 (married) on the sale of a home are not taxed.

If the house is an investment property owned more that 12 months, depreciation gain will be taxed at 25% and market gain at 20%, plus any state capital gain tax. If the investment has been owned less than 12 months, a gain on the sale would be taxed as ordinary income.


Re: capital gains - Posted by ScottE

Posted by ScottE on October 22, 2000 at 11:01:48:


Could you explain further the “depreciation gain” and “market gain”?