When is tax payable on Unrecaptured Section 1250 Gain after sale of rental property?

[jayakumarn]

I recently sold a rental property (used as primary residence for 3 of last 5 years and rented out for 2 years). There is no capital gains tax since the capital gain was less than 500k, but I understand I owe tax on the Unrecaptured Section 1250 Gain (since I claimed depreciation on the property for the last 2 years). Do I need to pay that tax when I file my tax returns, or should I pay it this quarter in advance?

[tagteam · Accepted solution]

TurboTax will calculate the unrecaptured Section 1250 gain for you. That portion of the gain is taxed at ordinary income tax rates up to a maximum of 25%.

You can make an estimated payment (or payments), but you can avoid a penalty if you do not make estimated payments if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year (110% of prior year tax if the prior year's AGI was over $150.000), whichever amount is less.

See https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

[Mike9241]

@tagteam that would be 110% of prior year tax if the taxpayer's prior year's AGI was over $150.000

[tagteam]

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@Mike9241 wrote:

@tagteam that would be 110% of prior year tax if the taxpayer's prior year's AGI was over $150.000

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Exactly and I edited my post to reflect that (thank you). I have no idea why the IRS web site does not include that little factoid.