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ckamhamel
New Member

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

 
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Opus 17
Level 15

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

TomYoung's is correct, with the additional factor that any permanent improvements you may have made will increase your cost basis and reduce your gain.  A permanent improvement is something that adds value or extends the useful life of the property, such as a new roof or furnace.  Repairs don't count and you already deducted them as an expense anyway.  And you can reduce your sales price by selling costs like legal fees, commission, and transfer taxes.

So your cost basis is [cost plus improvements minus depreciation].

Your gain is [sales price minus cost basis]. 

The first $21.2K of the gain is taxed at 25% and any amount over that is taxed as a long term gain.

Your mortgage is irrelevant because it's money that had no tax consequences when you borrowed it so it has no tax consequences when you pay it back.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

7 Replies
Opus 17
Level 15

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

The amount of the mortgage is irrelevant. What was the original purchase price before depreciation?
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
ckamhamel
New Member

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

$47,500
TomYoung
Level 13

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

Then overall you have a gain of $63K - ($47.5K - $21K) = $36.5K.  The depreciation recapture of $21K will be taxed at  ordinary tax rates, up to 25%.  The remaining $15.5K will be taxed at LTCG statutory rates which might range from 0% to 20% depending on your personal circumstances.
ckamhamel
New Member

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

Rental house - Purchase price = $47,500. Sold = $63,000. Total deprecation = $21,127. What is the estimated % capital gains I can expect to pay?
Opus 17
Level 15

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

He just told you.  25% on the depreciation, and 0-20% on the rest, depending on your other income.  Long term capital gains are 15% for most people but if your other income is very high it might be 20% and if your other income is very low it might be 0%.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

TomYoung's is correct, with the additional factor that any permanent improvements you may have made will increase your cost basis and reduce your gain.  A permanent improvement is something that adds value or extends the useful life of the property, such as a new roof or furnace.  Repairs don't count and you already deducted them as an expense anyway.  And you can reduce your sales price by selling costs like legal fees, commission, and transfer taxes.

So your cost basis is [cost plus improvements minus depreciation].

Your gain is [sales price minus cost basis]. 

The first $21.2K of the gain is taxed at 25% and any amount over that is taxed as a long term gain.

Your mortgage is irrelevant because it's money that had no tax consequences when you borrowed it so it has no tax consequences when you pay it back.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

TaxGuyBill
Level 9

Rental house sale = $63,000. Minus mortgage = $36,000 profit. Total depreciation = $21,127. $36,000 - $21,127 = $14,873. What capital gains % will I pay?

Be aware that 'extra' income may affect other things on your tax return, effectively increasing your tax.  Don't forget about any State taxes as well.
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