Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Your taxes, your way. Get expert help or do it yourself. >> Get started
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
lifebaptist17
New Member

If I sell the rental that I inherited eight years ago and the step up was 77,000 and I sell it for 114k what will I pay in taxes? Thanks

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 

1 Best answer

Accepted Solutions
Hal_Al
Level 15

If I sell the rental that I inherited eight years ago and the step up was 77,000 and I sell it for 114k what will I pay in taxes? Thanks

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.

View solution in original post

ratings image
2 Replies
Critter
Level 15

If I sell the rental that I inherited eight years ago and the step up was 77,000 and I sell it for 114k what will I pay in taxes? Thanks

Have you been depreciating the property as required by law ?   If you have not then seek professional tax prep help to correct this error first ... then ask them about the sale.
Hal_Al
Level 15

If I sell the rental that I inherited eight years ago and the step up was 77,000 and I sell it for 114k what will I pay in taxes? Thanks

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.

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.49m
Members

2.62m
Discussions

Manage cookies
v