The tax you can expect to pay on the sale of an investment property depends on a number of factors, including how long you held the property, your total income, and any applicable deductions or credits. The primary tax considerations are capital gains tax, depreciation recapture, and possibly state taxes.
Assuming you sell your investment property for a gain, you would need to determine the nature of the gain (e.g., short term or long term) to determine the tax rate on the gain. If you held the property for one year or less, any profit is considered a short-term capital gain and is taxed at your ordinary income tax rate, depending on your total taxable income.
If you held the property for more than one year, the profit is considered a long-term capital gain. Federal tax rates for long-term capital gains are generally lower, ranging from 0% to 20%, depending on your taxable income.
If you claimed a depreciation deduction on the investment property during the period you owned it, you’ll have to recapture that depreciation when you sell the property. Depreciation recapture is taxed as ordinary income up to a maximum rate of 25%.
In addition to federal taxes, many states levy their own capital gains taxes. The state tax rates and rules vary widely, so you'll need to check the specific requirements for your state.
Finally, depending on your modified adjusted gross income, you may also be subject to the 3.8% Net Investment Income Tax.
In short, there isn’t one percentage of tax you can expect to pay on the sale of investment property, because of the multiple factors involved and the varying applicable taxes.
I hope this necessarily general answer is nevertheless helpful.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
