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Level 3

Prepaying State and Federal Taxes on Sale of Investment Property

Hello,

 

I'm having a hard time searching for this situation but imagine it had to be asked.  Perhaps I'm typing the wrong search terms.

 

I recently sold a rental property and have capital gains and depreciation on it.  I imagine this means I will have a larger than usual tax bill this coming year and wanted to know how I file that paperwork with the Federal Government and the Hawaii State Tax Collector.

 

I bought the home in 2009 for $365,000 and converted it to a rental in 2012 where I started depreciating the property.  I sold the property in 2019 for 585,000 and believe I owe roughly 20,000 in depreciation, 30000 in capital gains to the Federal Government and another 30,000 to the State of Hawaii.  Which forms do I have to fill out to make sure I don't get penalized for underpayment of taxes for 2019?

 

Thanks in advance!  I've been using Turbo Tax this whole time so I imagine it is tracking all the actual depreciation, improvements, etc when I actually file taxes.

4 Replies
Level 20

Prepaying State and Federal Taxes on Sale of Investment Property

You can send in an estimated payment.  

Here are the blank estimate forms and instructions for federal.  You need to go to your state's website to get theirs.

https://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2019 Estimate

 

The 1040ES quarterly estimates are due April 15, 2019, June 17, Sept 16 and Jan 15, 2020.  Your state will also have their own estimate forms.

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Level 20

Prepaying State and Federal Taxes on Sale of Investment Property

For federal taxes, it's a fair bet your taxes on the gain (and do include recaptured depreciation as "a part of" the gain) will be 25% or less. So if you pay the IRS 25% of the gain right now at www.irs.gov/payments, then come tax filing time you'll be fine.

In the state of Hawaii your gain will be taxed at a max of 8.25%.  Since you had to register as a landlord in Hawaii for the GET and other taxes, start at https://tax.hawaii.gov/eservices/ to see what methods are available to you for online payment of state taxes so you can determine which is best for and most applicable to your situation.

 

Level 3

Prepaying State and Federal Taxes on Sale of Investment Property

Thank you so much!  Exactly what I was looking for.

Level 3

Prepaying State and Federal Taxes on Sale of Investment Property

Thanks for the additional information Carl!  For some reason I mistakenly read 11% for Hawaii even though I know we're more 8%.  The validation was helpful.