I sold a rental property in Jan 2024. How do I estimate taxes on long-term capital gain and depreciation recapture?

[Bachatera]

The long-term capital gain is $200,000.  Do I estimate a 15% tax, i.e. $30,000?

And, turbo tax calculated depreciation as $42,000.  Do I estimate another 25% tax on it, i.e. $10,500?

Can I pay both estimated taxes above ($40,500) all in one go by April 15th, 2024?

Thank you!

[MarilynG1]

Your Capital Gain will be the difference between your Cost Basis (Remaining Undepreciated Balance), and Sales Proceeds, less Costs of  Sale, so depreciation recapture that you have already taken (or should have taken) is already calculated in.

Long Term Capital Gains can be taxed at anywhere from 0% to 20%, depending on your Income Bracket.  Here's more info on How Capital Gains are Taxed.

If you owe over 1K in Income Tax, you can pay Estimated Taxes if you think you will also owe tax for 2024.  

For your 2023 Balance Due, you can also make Installment Payments to the IRS.

[AmeliesUncle]

Yes, yes and yes.

However, you MIGHT actually owe more tax than that.  Or possibly even less.

The capital gain could be subject to the 3.8% Net Investment Tax.  If your income is really high, the long-term capital gains could be taxed at 20%.  That 'extra' income could affect other things on your tax returns, such as reducing (or eliminating) some credits or deductions.

The tax on the depreciation is at your regular rate, UP TO 25%.  So if your regular tax bracket is less than 25%, you may have less tax on the depreciation.  

If you want a more accurate estimate, you could create another 'mock' TurboTax account, and enter all of your estimated 2024 information (including the sale) to see the results.  If you are using the CD/downloaded version of TurboTax, you could "Save As" to create a second 'mock' tax file, then enter the rental sales date as December 31st, 2023 (just be sure to not accidently e-file the 'mock' test return).

[Bachatera]

Thank you for your reply.  Very helpful!

I live in NJ and this rental property is also in NJ.  How do I estimate taxes for this sale of rental property for NJ Tax Return?  

[DianeW777]

The New Jersey (NJ) tax rates are graduated, which means as the taxable income goes up so does the tax rate.  The link below will provide the worksheets to figure out your tax for 2024 based on your sale.

• Form NJ-1040-ES - The tax rates for 2024 are shown based on filing status. 

Who Must File 

Whether you are a resident or a nonresident, you are required to make estimated tax payments if you estimate that you will owe more than $400. 

You can file by mail or pay online - NJ Estimated Payments

@Bachatera 

[Bachatera]

Thank you for your guidance.  Very helpful!