You will first apply depreciation recapture which is computed as this:
Original basis minus depreciation equals "Adjusted basis"
Subtract your adjusted basis from the selling price to get the total profit.
The profit is first allocated to depreciation recapture.
Whatever is left is capital gain
Example
Purchased 210,000
Basis-house 200,000 Land 10,000
Took 105,000 depreciation.
Sold 400,000
Land 20,000 house 390,000
(Land does not depreciate)
Basis stays at 10,000
Capital gain on land
20,000 - 10,000 = 10,000 capital gain on the land.
Adjusted basis for house
original basis minus depreciation
200,000 - 105,000 = 95,000
selling proceeds minus adjusted basis
390,000 - 95,000 = 295,000 profit
First 105,000 of profit is depreciation recapture leaving 190,000 Capital gains.
190,000 Capital gain on house plus 10,000 on land = 200,000 capital gain total
105,000 depreciation recapture
Taxes are due as earned so you might want to send in an estimated tax payment,
However, whether you'll face an underpayment penalty depends on other factors.
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