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posted Jun 21, 2021 2:53:38 PM

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
Level 15
Jun 21, 2021 3:46:32 PM

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

 

 

 

4 Replies
Level 15
Jun 21, 2021 3:46:32 PM

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

 

 

 

Level 15
Jun 21, 2021 4:55:12 PM

3) should be 2020 adjusted gross income

Level 15
Jun 22, 2021 8:25:22 AM

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.

 

Level 12
Jun 22, 2021 12:39:29 PM

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.