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George966
Level 2

Do I have to pay both, depreciation recapture and capital gains tax on the full rental property sale price if the house is fully depreciated? adjusted cost basis is zero.

 
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Anonymous
Not applicable

Do I have to pay both, depreciation recapture and capital gains tax on the full rental property sale price if the house is fully depreciated? adjusted cost basis is zero.

put another way if you gain (selling price less costs of sale less net property  basis (after depreciation)  is more than the depreciation recapture you pay recapture tax on the depreciation and capital gains tax on the excess.   if the gain is equal or less than the recapture you pay the recapture rate on this amount. there will be no capital

gains tax. 

 

you didn't ask but if you haven't  yet sold the property there is a way to avoid income taxes by doing a 1031 exchange.   you'll need a real estate attorney familiar with handling these type of deals. you can't do it by yourself and there are various rules that must be met to avoid taxation. 

 

while the upside is escape of taxation, the downside is that to escape taxation completely you can get any boot out of the deal - cash, non like kind property mortgage reduction    there are also addition fees vs a sale

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2 Replies
smarttees
Level 5

Do I have to pay both, depreciation recapture and capital gains tax on the full rental property sale price if the house is fully depreciated? adjusted cost basis is zero.

recapture gets taxed at up to a 25% rate depending on your income.......total income determines what rate you pay......you don't pay both capital gains tax and recapture.

Anonymous
Not applicable

Do I have to pay both, depreciation recapture and capital gains tax on the full rental property sale price if the house is fully depreciated? adjusted cost basis is zero.

put another way if you gain (selling price less costs of sale less net property  basis (after depreciation)  is more than the depreciation recapture you pay recapture tax on the depreciation and capital gains tax on the excess.   if the gain is equal or less than the recapture you pay the recapture rate on this amount. there will be no capital

gains tax. 

 

you didn't ask but if you haven't  yet sold the property there is a way to avoid income taxes by doing a 1031 exchange.   you'll need a real estate attorney familiar with handling these type of deals. you can't do it by yourself and there are various rules that must be met to avoid taxation. 

 

while the upside is escape of taxation, the downside is that to escape taxation completely you can get any boot out of the deal - cash, non like kind property mortgage reduction    there are also addition fees vs a sale

View solution in original post

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