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ChrisR5
New Member

Sale of Rental Property

I sold a Rental Property in June that I've owned for 7 years.  The profit from the sale was around $100,000.  Will I need to pay estimated taxes on this capital gain to avoid a penalty from the IRS?

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1 Best answer

Accepted Solutions

Sale of Rental Property

If you don't pay the estimates and your withholding isn't any of the following you will be hit with underpayment penalties.

 

1) 2021 balance due after withholding is less than $1000

2) withholding covers 90% of 2020 tax

3) withholding is 100% (110% if 2021 adjusted gross income is over $150,000) of 2020 tax

 

 

 

See this for calculating 2020 estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

 

See this for paying estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875

 

 

 

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4 Replies

Sale of Rental Property

If you don't pay the estimates and your withholding isn't any of the following you will be hit with underpayment penalties.

 

1) 2021 balance due after withholding is less than $1000

2) withholding covers 90% of 2020 tax

3) withholding is 100% (110% if 2021 adjusted gross income is over $150,000) of 2020 tax

 

 

 

See this for calculating 2020 estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

 

See this for paying estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875

 

 

 

Sale of Rental Property

3) should be 2020 adjusted gross income

Carl
Level 15

Sale of Rental Property

Based on my own experience, if you send the IRS 20% of the gain, then come tax filing time you'll be fine. http://www.irs.gov/payments.

If your state also taxes personal income, then you should make an estimated payment to your state tax authority also. Send the state an amount equal to whatever the highest tax rate is for personal income by your state. The highest I'm aware of is around 8.5% in CA.

 

M-MTax
Level 10

Sale of Rental Property

The highest I'm aware of is around 8.5% in CA.

California state tax rates are 1%, 2%, 4%, 6%, 8%, 9.3%, 10.3%, 11.3% and 12.3%.
Based on my own experience, if you send the IRS 20% of the gain, then come tax filing time you'll be fine.
You'll be fine if you just do as @Critter-3 posted as corrected by @Mike9241. The idea is not to get a penalty.
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