Posted by John K Haslach, CPA, MST on June 29, 2005 at 16:47:25:
Depreciation recapture on real property is taxed at 25%. On personal property it is taxed at ordinary income rates.
Depreciation is allowed or allowable which means, even if you did not take depreciation, when you sell the property, you must reduce your basis by the amount of depreciation which you should have taken.
Taxes on Rental Sale - Posted by Dazed and Confused
Posted by Dazed and Confused on June 28, 2005 at 11:58:42:
I understand about the capital gains issue on the sale of a rental property. What I’m wondering is, will the sales price (or profit) also be added to my gross income on my tax return, thereby causing me to pay more personal tax ( I hold the property in my name)?
Thanks,
Dazed.
Re: Taxes on Rental Sale - Posted by Jimmy
Posted by Jimmy on June 29, 2005 at 09:07:00:
first. compute your basis in the property. this will be the original cost, plus any improvements which you capitalized, less depreciation. separate out the basis in the land, the building and any appliances included in the deal. Even though you are selling the package, technically, you are making three sales.
if your holding period is at least one year, you may qualify for long term capital gains. if less than a year, the gain or loss will be short term. Short term gains are taxed like ordinary income. Long term gains qualify for a lower rate. Capital losses, whether long or short term, can be used to offset an unlimited amount of gains, plus $3000 more each year. Losses can be carried forward to future tax years to offset future gains.
if you depreciated the building or the appliances on an accelerated method, you may have to recapture some of the depreciation. This recapture income willbe taxed as ordinary income. A tax preparer can help you get a grip on this.
Re: Taxes on Rental Sale - Posted by Dazed and Confused
Posted by Dazed and Confused on June 29, 2005 at 14:16:40:
Jimmy,
Thanks for the reply!
Dazed