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Level 1
October 26, 2021
Question

If my 2022 income is less than $40,000.00. I sell 3 rental properties that I have owned for 9 years for a profit of 300,000. Do I have to pay Capital Gains tax?

  • October 26, 2021
  • 4 replies
  • 55 views
I bought the properties in 3 separate transactions for a total of 168,000. I anticipate selling them in 2022 for 470,000.

4 replies

Critter-3
Level 15
October 26, 2021

My dear sir ... you really need to get educated on the sale of rentals since you will not only have capital gains but recapturing of the depreciation as ordinary income.  Seek local guidance and education or do some reading up yourself ... start with the IRS Publication 527. 

 

If you have not been depreciating the properties then RUN to a local tax pro who is familiar with the form 3115 to get this error corrected on your next tax return.  

 

 

Alumni - Champ
October 27, 2021

YES, you'll have to pay capital gains tax.

 

Using your figures and Single filing status:

 

Work income (excluding capital gain) $40,000 + LT capital gain $300,000 = Total taxable income $340,000.

Entire capital gain would be taxable at 15%, which =

$45,000 federal tax on the capital gain 

 

Calculation does not include state capital gain tax, if any.

 

Here's a link to an online CG tax calculator.  With the online calculator, enter your State of Residence and your Filing Status at the top of the page, and then enter your numbers.  It will then calculate your state CG tax as well as the federal:

Capital Gains Tax Calculator 2021 | Casaplorer

 

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Carl
Level 11
Level 11
October 27, 2021

Short answer to your question is YES. You will pay long term capital gains on any and all gains realized. You will also be taxed on recaptured depreciation weather you actually took said depreciation or not.

 

Hal_Al
Level 15
Level 15
October 31, 2021

The $40,000 income threshold (before which capital gains are taxed) that you have heard of is based on ALL of your  "taxable income", including the capital gains.  It works like this example:

$30,000 other income (you said less than $40,000) + $300,000 capital gains + $40,000 (rough estimate) depreciation recapture = $370,000 total income; less the $12,550 standard deduction = $357,450 taxable income.  Less the $40,525 (12% tax bracket/capital gains tax ) threshold = $316,925 of your income will be in the higher (than 12%) tax brackets.  Since this is more than your $300,000 capital gain, all of the gain will be taxable (at 15%).  Depreciation recapture is taxed as ordinary income, but not more than 25%.