Sale of Rental Property, with 0% capital gains

[lizab1]

I have owned a SFH for 25 years. It has been a rental property for 20 years. I have sold the property and have a capital gain of approximately 270K. My gross annual income is 39K. I have had very little taxes to pay over the years since deductions always brought it down. The rental property was always a break even or loss (with depreciation). I am retiring and sold the property. TT says I have to pay about 40K in CGs. I thought I would qualify for zero percent due to my low income bracket. Can someone please clarify this for me. Thank you in advance. 

[Mike9241]

you have written off through depreciation deductions about 60% of the building's cost. to the extent your gain equals that writeoff, it subject to recapture probably at a 25% tax rate. only the gain in excess of your cost, if any, is capital gain. even then based on your capital gain amount and other income, not all would be taxed at 0%

[Carl]

The depreciation you've taken over the years is recaptured and taxed in the tax year you sell the property. The depreciation recapture is *not* exempt from taxation under the "2 of last 5" rules, or any other rules. Two things heppen in the year you sell the property.

1) You pay taxes on the recaptured depreciation taken over the years.

2) The recaptured depreciation is added to your AGI, which means it's perfectly -possible for you to get bumped into the next higher tax bracket.

[AmeliesUncle]

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@lizab1 wrote:

property and have a capital gain of approximately 270K. My gross annual income is 39K. 

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Besides the tax on the gain due to depreciation (which is taxed at your regular tax bracket, up to 25%), your income this year is $309,000.  That is WAY past the 0% capital gain bracket.