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Thank you very much. You helped a lot. Not related to depreciation recapture but related to rental property sale:

 

I just learned that there will be an underpayment penalty. If you sold a house, i.e., had a big capital gain event (significant taxable income increase from the previous year), how did you manage to make prepayments to avoid tax penalties (LINE 38 in 1040)? I am a bit confused, as it seems one must make prepayments each quarter - is it applicable to me (I am a W2 employee)? Can one just make one lump sum prepayment before Dec 31 and how to avoid the tax penalty for underpayment when huge capital gain tax is expected from rental property sale?

See the reference here: https://www.hrblock.com/tax-center/i...0and%20credits

 

@Mike9241