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dkclack
Level 1

Taxable income

If I sell my fully depreciated rental property for $270,000 and I paid $69,000 for it 30 years ago I'm trying to see how it affect my tax liability. My other income is Social Security of $21,000. Will the capital gains be $270,000 and will the $270,000 be added to my aging for the year?

1 Best answer

Accepted Solutions
Hal_Al
Level 15

Taxable income

The long term  capital gain (LTCG) will be $201,000 (270K -69K). In addition the depreciation recapture (all but the land portion of the $69K) will be treated as section 1250 gain.

 

Yes, both of those will be added to your AGI and that will result in 85% of your social security becoming taxable.

 

LTCG are partially taxed at 0% and 15%*, depending on filing status.  Depreciation recapture is taxed at your marginal rate, but not more than 25%.

 

*see https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates

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2 Replies
gloriah5200
Expert Alumni

Taxable income

Depending on the types and amounts of depreciation previously deducted on the rental property sold, the gain on the sale will be subject to ordinary income tax rates first and then the remaining portion of the gain will be subject to capital gains tax rates.

 

TurboTax will calculate the amount of taxable gain on the sale subject to ordinary income tax rates and capital gains tax rates.

 

The gain reported as ordinary income and capital gains income is included in AGI.

 

Refer to the following link for additional information on the type of tax you will be seeing on your return for the sale of a fully depreciated rental property when sold at a gain:

 

Calculation of tax on sale of fully depreciated rental:

 

 

Hal_Al
Level 15

Taxable income

The long term  capital gain (LTCG) will be $201,000 (270K -69K). In addition the depreciation recapture (all but the land portion of the $69K) will be treated as section 1250 gain.

 

Yes, both of those will be added to your AGI and that will result in 85% of your social security becoming taxable.

 

LTCG are partially taxed at 0% and 15%*, depending on filing status.  Depreciation recapture is taxed at your marginal rate, but not more than 25%.

 

*see https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates

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