We purchased a house in 2013 and ended up moving for husband's employment. We have rented the house out since 2015 and are now looking to sell the house to the tenants. I am trying to get a ballpark figure of the tax implications for selling the property and capital gains.
This is how I am calculating it:
Purchase Price = $175,000 (does not include other costs = deposit, etc. Do I figure in those costs?)
Improvements since rental = $6,000
Depreciation (while rental 2015 -2019) = $21,000
Selling Price = $235,000
So the basis would be purchase price + improvements - depreciation = $160,000
I would be taxed on the sales price - basis = $75,000 which would be at 15% based on my tax bracket.
Then the depreciation would be taxed at 25%
Lastly there is the 3.33% of the sales price = $7,825 withheld by the title company for the FTB in California
So from the proceeds I would pay approximately $11, 250 (capital gains) + $5,250 (depreciation recapture) + $7,825 (FTB) = $24,325
Am I doing it right?
