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marciejpyke
Returning Member

Long term capital gains

I'm selling a rental property and I'll be profiting around $125k. 

 

My income puts me in the 0% capital gains bracket, but from what I'm understanding I would still need to pay 15% on any profits that brings my income past $40,400.  This is if I dont do the exchange of course.  Do I have this right or no? 

 

Thank you in advance! 

2 Replies
Critter-3
Level 15

Long term capital gains

Ok... you really need to talk to somebody locally to discuss this correctly.   Your "profit" will have some depreciation recapture which is taxed as ordinary income at a rate not to exceed 25% and if you have not been properly depreciating the property over the years  then RUN for professional assistance so you are not double taxed ... this is not a DIY project and TT will not handle it at all.  

Hal_Al
Level 15

Long term capital gains

Q.  From what I'm understanding I would still need to pay 15% on any profits that brings my income past $40,525 (2021 number). Do I have this right or no? 

A.  Yes, but not exactly.  The $40,400 amount is taxable income, not your total income or even your AGI.  Assuming you get a $12, 550 standard deduction, it's essentially you pay 15% on any profits that brings your income past $53,075.  But the depreciation recapture portion of the gain is taxed as ordinary income, not the 15% capital gain rate (probably 22%, but not more than 25%).

 

 

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