Hello everyone. Does anyone have an idea when I should pay the capital gains taxes on a home I just sold at the end of April this year (2018)? I currently live in Pennsylvania and this house was a rental home for 10 years. So, I'm not sure if I have to pay an estimated tax now OR if I can wait to file my taxes for 2018 and pay then without penalties. Thanks in advance for any educated answers!
When you sell a rental property, your cost basis is the amount you paid, plus any improvement, minus any depreciation taken. If that calculation for cost basis produces a gain, you will pay two types of tax. One will be the recapture of your depreciation up to the amount of the gain, taxed at 25%. The other will be a capital gains tax on any gain over the depreciation amount, and that could be anywhere from 0-20%, depending on your other income. The final result can be quite complicated to calculate because you would also be able to deduct any losses you have been accumulating over the years of the rental. It would be advisable to file an estimated tax payment in the quarter that you close on the property unless you usually have enough withheld from any W-2s to receivie a large enough refund to cover at least the depreciation recapture tax.