selling two investment properties in one year

[mdrecht]

Hello,

I think and hope this is a basic question. If I sell two investment properties in one year, both of which I plan to pay taxes on, do the two sales push my capital gains into a higher capital gains bracket or are the sales done separately?

Are all of my gains combined or is each sale treated separately? Combining seems logical but at the same time it gets tricky combining cost basis and the possibility that one may be (but not definitely) short term and the other long term.  Say for exampled my household income is 100k (married filing joint) and i make 100k on each sale. Do i put the 200k on top of my income and get pushed into the 24% bracket for a big chunk of this gain or is each done separately on top of income. i'm still confused how this would work if one were short term and the other long term.

I'm probably over explaining but trying to be as clear as possibly with my question as i'm not finding this example anywhere on the internet somehow. Maybe because nobody pays taxes on two homes in one year because it's dumb,  but it's a unique situation 🙂 

shorter version question -- for tax reasons, is this a really bad idea to sell both of these homes in the same year..... ? thanks!

[VolvoGirl]

Yes it knows long term and short term.  Turbo Tax will figure it out on Schedule D.  

Even though the full amount shows up as income on the 1040 as income, if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.  In the online version you need to save your return as a pdf file and include all worksheets to see it.

[mdrecht]

Thanks for the info

But in terms of the main part of the question, the extra 100k on the 2nd home sale in the same year -- will this push me into a higher effective capital gains rate or is each sale handled separately? Again, might be a dumb question.... thanks either way!

[Critter-3]

Sorry but  nothing is taxed in pieces so the  more income you have will automatically put you in a higher tax bracket and there is no way around it. 

[mdrecht]

ok got it and i figured it might be a dumb (ish) question. so in the case that one is short term and the other long, the short term counts as ordinary income and pushes my long term gains into the higher LT bracket i'm assuming. cheers

[Mike9241]

yes, that second $100K is going to cost you. but how much we can't say. If this is rental property first, you must recapture as section 1250 gain all the depreciation taken. this can be taxed at up to 25%.  next you'll have $300K of taxable income which will subject you to a 3.8% net investment income tax on about $50,000 or an about $1900 on top of the regular income taxes. it's even worse if $100K is short-term. long-term gain, this does not include section 1250 recapture, gets taxed a preferred rate possibly only 15% while short-term is tax just like other household income.  

you can use this link (2022 but should give you a reasonable estimate of 2023 taxes) to get an estimate and do various scenarios to see the effect. state taxes are not included.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster 

it's probably more tax efficient to sell in different years but no one knows what 2024 will be like. so, there is economic risk in delaying the second sale.

[mdrecht]

This is super helpful and i was not aware of the 3.8%, but i don't think that would be a game changer in our case. thanks so much for the info!

[toofan1]

I have 3 residential properties. I only sold one at a gain in 2022. When I get to the rental (Schedule E) for that sold asst, the “asset entry worksheet “specifically asked that the land price, selling price of the land and the appropriate selling cost to be segregated form the building.

I assume the land information will go to part I of form 4797 and the building part III of the form.

Now when I continue with “easy step. There is another section that askes about “any other property sale” Should I do that section two?

Somehow, I am getting two copies of PAGE 2 of the FORM 47497 and the information does not flow through. The second copy is called enterable copy! I get unusual number for and the capital gain calculation. So, I was wondering where I went wrong. I tried to override the. Numbers. But overriding will not allow me to file electronically.