Sold a Rental Property

[greg_sandford1]

The Profit reported doesn't seem right for a rental I sold last year

Information transferred from 2021

Cost = 157,000

Land = 18,240

Business = 100%

Prior Depreciation = 81,803

Sales Information

Asset Sales Price = 269,886

Asset Sales Expense = 19,364

Land Sales Price = 35,750

It says I have a gain of 195,389

We bought it for 157,000, sold it for 325,000 had expenses of 20,000

Profit should be 148,000

Seems I am being taxed on 195,389 instead of 148,000

[Anonymous_ · Accepted solution]

You either have some sort of input error or you are not (fully) taking into account the reduction of your basis due to depreciation. 

Using the (rough) figures you presented, below is a screenshot of my results on a test return. For increased accuracy, you will have to provide the purchase and sale dates.

[Carl]

The difference is basically the depreciation. (I didn't figure exact amounts on my end). But that's what it looks like at first glance. When you sell rental property, you are required to recapture all depreciation taken and pay taxes on it in the year of the sale. If you did not depreciate the property, then you are still required to recapture and pay taxes on the depreciation you "should" have taken.

While any gain realized on the sale is taxed at the capital gains tax rate, recaptured depreciation is taxed at the ordinary tax rate, up to a maximum of 25%.

[greg_sandford1]

Bought the house  3/1/2006

Sold it  5/24/2022

I suppose this is ok, just wanted to make sure I wasn't getting over taxed on it.  I didn't expect paying tax on the depreciation was going to be that much.

[Anonymous_]

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@greg_sandford1 wrote:

I suppose this is ok, just wanted to make sure I wasn't getting over taxed on it.  I didn't expect paying tax on the depreciation was going to be that much.

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Yes, I was able to replicate the results by taking an educated guess with respect to the dates and was close enough.