I inherited my fathers house 7 years ago & have been renting it. I just sold it for 114k & I will receive 106k after all said & done. When I did my taxes that year it stated the was valued at 77k. What will I owe in taxes? Thanks
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When you inherited the property, you should have split the $77,000 stepped up cost basis into two pieces, land and improvements (the building). You then began depreciating the building basis.
Your net long term capital gain, for the sale, = proceeds of the sale minus cost basis plus depreciation claimed over the years (106,000 – 77,000 + 13,000 [my guess for approx amount of depreciation] = $42,000 capital gain.
Another way to say that is: your cost basis must be adjusted for depreciation recapture. $77,000 - 13,000 = $64,000 new cost basis. 106,000 – 64,000 = $42,000 capital gain.
The depreciation recapture portion, of the gain, will be taxed at ordinary income rates (but not more than 25%). The rest of the capital gain will be taxed at long term capital gains rates (some at 0% and some at 15%).
For an estimate, try this tool https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1.
Enter your regular income first to see the regular tax. Then add the sale to
see the effect.
Enter the ( 106K – 77K = 29K ) as a long term
capital gain (LTCG). Enter the depreciation (13K) you've taken over the years
(depreciation "recapture") as other income.
When you inherited the property, you should have split the $77,000 stepped up cost basis into two pieces, land and improvements (the building). You then began depreciating the building basis.
Your net long term capital gain, for the sale, = proceeds of the sale minus cost basis plus depreciation claimed over the years (106,000 – 77,000 + 13,000 [my guess for approx amount of depreciation] = $42,000 capital gain.
Another way to say that is: your cost basis must be adjusted for depreciation recapture. $77,000 - 13,000 = $64,000 new cost basis. 106,000 – 64,000 = $42,000 capital gain.
The depreciation recapture portion, of the gain, will be taxed at ordinary income rates (but not more than 25%). The rest of the capital gain will be taxed at long term capital gains rates (some at 0% and some at 15%).
For an estimate, try this tool https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1.
Enter your regular income first to see the regular tax. Then add the sale to
see the effect.
Enter the ( 106K – 77K = 29K ) as a long term
capital gain (LTCG). Enter the depreciation (13K) you've taken over the years
(depreciation "recapture") as other income.
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