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My question: How much of the depreciation will I be taxed on? Will I pay 25% tax on the full $12K or on the $8K remaining after the loss? Do I need any forms other than Schedule D?

You will pay 25% on $8K (using the numbers you provide). You will need to report the sale on form 4797 (from which gains and losses are carried to sch D). You definitely should get professional help to prepare this return. You will come out ahead, believe me! It's very possible there are expenses you haven't thought of which could save you much more than the cost of an accountant.

Can't help you estimate your state tax, but, as a very rough guess, you will pay the IRS $10,000 on the sale of the land (assuming you are in the 28% bracket excluding both sales, less if you are in the 15% bracket). You will pay the feds $2,000 on the rental (same assumption).

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