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Author: LuvtoRead Old School Fool SC1 Red Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Tax Liabilities on Sale of Rental Property Date: 3/8/2014 6:59 PM
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I am considering selling a rental property which has been fully depreciated. I bought it for 60K with 10K as land value. It is going to be a tear-down with land value now being around $250K. I am in the 25% marginal rate bracket for 2013. How much capital gain tax that I might expect to pay on April 2015?

If I have less income in 2014, say less than 100K, would that affect my capital gain tax on the rental property?

Thank you for any assistance from y'all!
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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120412 of 121592
Subject: Re: Tax Liabilities on Sale of Rental Property Date: 3/9/2014 6:20 PM
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I am considering selling a rental property which has been fully depreciated. I bought it for 60K with 10K as land value. It is going to be a tear-down with land value now being around $250K. I am in the 25% marginal rate bracket for 2013. How much capital gain tax that I might expect to pay on April 2015?

If I have less income in 2014, say less than 100K, would that affect my capital gain tax on the rental property?


Well, your capital gain (before selling and demolition expenses) will be under $240,000- the land value less the $10,000 basis of the land LESS the selling expenses and demolition costs. (Or will the buyer be paying for the demolition?)

You say you're in the 25% regular tax bracket. Married or single makes a difference. Your federal tax rate on the capital PROBABLY is 18.8% (max rate of capital gains = 15% plus the 3.8% new tax on NII - (net investment income.) It doesn't sound like you'll be in the top bracket, where your capital gain rate would go to 20%.

State taxes would be additional, and may or may not be deductible for federal purposes, depending on if AMT applies, and it usually does, when AGI is mostly capital gains.

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Author: LuvtoRead Old School Fool SC1 Red Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120413 of 121592
Subject: Re: Tax Liabilities on Sale of Rental Property Date: 3/9/2014 7:43 PM
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Thank you for pointing out the new NII tax on top of the capital gain tax and the state tax that I may have to pay, not to mention about the AMT angle.

The property will be sold as is so I probably have to pay for cost of sale only. The big number is the capital gain tax to both state and federal to the tune of 45K to 50k. I guess it is a nice problem to have.

Again, thank you for your reply. Much appreciated!

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