On the sale of your condo it will be a capital gains scenario.
The three items that will determine the gain or loss on the sale of your condo are the Adjusted Basis, Depreciation Taken to Date and the Selling Price.
The tax you pay after selling a rental property depends on your profit. The IRS taxes the profit in two ways. The first is a capital gains tax that is 0%, 15%, or 20%, depending on your taxable income and filing status. The second is a maximum depreciation recapture tax of 25%. Keep in mind to check the updated TurboTax Big Beautiful Bill blog: One Big Beautiful Bill blog
The Selling Price for tax purposes would be the Gross selling price less selling expenses such as commissions and other closing costs paid by the seller.
A simple example follows:
$200,000 Net Selling Price
$100,000 Adjusted Basis (135,000 less 35,000 of depreciation)
$100,000 Gain
< 35,000> Depreciation recapture taxed at ordinary income tax rates
$ 65,000 Capital gain, taxed at capital gain tax rate of 0%, 15%, 20%
Here is a link with further details: Sale of rental - IRS link
Have an amazing day. Evelyn M (CPA 20+ years)
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