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Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

I need help.  I am selling a rental home I own in California (I currently live out of state).  I don't meet any of the requirements to waive capital gains taxes on the sale.  How does capital gains taxes work though, I've read everywhere that it's 15%, but is that just the federal govt's portion?  Is there an additional capital gains tax that I'll owe the state of California?  And if so approx what % is the state capital gains tax?

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Level 12

Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

Your actual tax on the sale, (at a profit, seemingly), for federal purposes will be some combination of "depreciation recapture", taxed at the rate of 25%, and long term capital gains, taxed at anywhere from 0% up to 23.8%. depending on your income.  California has no long term capital gains rates and no depreciation recapture.  The gain will be taxed at "ordinary income" rates which can range from 1% up to 12.3%.

Sorry, the US Income Tax System and the California Income Tax system, (and every other state in the union, undoubtedly), are so complex, so full of phase-ins, phase-outs, surtaxes and every other form of "gotcha" that the political class can devise that there's absolutely no "back of the envelope" calculation that's worth the paper it's printed on, especially when you have no real numbers to work with.

Tom Young

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4 Replies
Level 9

Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

To get results: Enter under the Rental topic and go through until you see a summary called Your Property Assets under the Sale of Property/Depreciation subtopic.  The screen tells you to edit each of your assets and that's where you enter the sale informaiton. As TomYoung stated - Too many factors to guess at tax impact without actual entry. Most likely, you'll owe a combination of income at Ordinary and CG rates - computed via Form 4797 ...
Level 12

Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

Your actual tax on the sale, (at a profit, seemingly), for federal purposes will be some combination of "depreciation recapture", taxed at the rate of 25%, and long term capital gains, taxed at anywhere from 0% up to 23.8%. depending on your income.  California has no long term capital gains rates and no depreciation recapture.  The gain will be taxed at "ordinary income" rates which can range from 1% up to 12.3%.

Sorry, the US Income Tax System and the California Income Tax system, (and every other state in the union, undoubtedly), are so complex, so full of phase-ins, phase-outs, surtaxes and every other form of "gotcha" that the political class can devise that there's absolutely no "back of the envelope" calculation that's worth the paper it's printed on, especially when you have no real numbers to work with.

Tom Young

View solution in original post

mcw
New Member

Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

California taxes rental home's capital gains and depreciation recapture as regular income.
What about passive activity loss carryover caused by depreciation? can that be used to offset California AGI in the year of rental home sale? Is the carryover amount same as Federal?

Thanks,
New Member

Selling a rental home in California - how are capital gains taxed? Federal or State? Both?

I have the same question. Using TTax, CA loss carry over can be used to decrease CA AGI. The carryover amount is not the same as Federal on my TTax files. Maybe due to varied CA rules?

I'm not a knowledgeable tax professional, just reporting how I saw the number flow in TTax