Solved: In regards to rental property sale. Do I have to pay normal federal taxes (as in taxable income) in addition to the capital gains tax rate? Also does California (the location of the property and resident state) also count it as capital gains and/or inco
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In regards to rental property sale. Do I have to pay normal federal taxes (as in taxable income) in addition to the capital gains tax rate? Also does California (the location of the property and resident state) also count it as capital gains and/or inco

 
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In regards to rental property sale. Do I have to pay normal federal taxes (as in taxable income) in addition to the capital gains tax rate? Also does California (the location of the property and resident state) also count it as capital gains and/or inco

No, it is just the capital gains rate for Federal.

However, the tax on the depreciation is taxed at your regular tax rate, up to 25%.  The rest of the gain is usually taxed at 15%.  I think California treats it all as regular income.

However, that 'extra' income may affect other things on your tax return, such as the 3.8% Net Investment Income Tax and some credits and/or deductions could be reduced.


For example, let's say you bought the property for $100,000, took $20,000 of depreciation, sold it for $150,00, and did not make any improvements to the property.  The $20,000 of depreciation is usually taxed at 25%, and the other $50,000 gain is usually taxed at 15%.  Plus State taxes, plus that 'extra' income could affect other things on your tax return.

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Level 9

In regards to rental property sale. Do I have to pay normal federal taxes (as in taxable income) in addition to the capital gains tax rate? Also does California (the location of the property and resident state) also count it as capital gains and/or inco

No, it is just the capital gains rate for Federal.

However, the tax on the depreciation is taxed at your regular tax rate, up to 25%.  The rest of the gain is usually taxed at 15%.  I think California treats it all as regular income.

However, that 'extra' income may affect other things on your tax return, such as the 3.8% Net Investment Income Tax and some credits and/or deductions could be reduced.


For example, let's say you bought the property for $100,000, took $20,000 of depreciation, sold it for $150,00, and did not make any improvements to the property.  The $20,000 of depreciation is usually taxed at 25%, and the other $50,000 gain is usually taxed at 15%.  Plus State taxes, plus that 'extra' income could affect other things on your tax return.

View solution in original post

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