Capital Gains

susanpbutler · ‎March 9, 2026

If my adjustable and taxable income is zero dollars ($), and I sell my rental house and make $60,000, is the $60,000 capital gain taxable? I ask because I read articles that indicate that if the tax rate is $0 if, your taxable income is under a certain amount. Since my taxable income is $0, wouldn't I be excluded from paying income tax on capital gains?

Opus 17 · ‎March 9, 2026

Yes, but

Income stacks for purposes of this calculation. If you are single, and take the standard deduction, roughly the first $45,000 of income is in the 10% or 12% bracket for regular income tax and the 0% bracket for capital gains. But if your total income is more than $45,000, that pushes the top income into the 22% income tax and 15% capital gains tax bracket. So if your only income is $60K of capital gains, the first $45K will be taxed at zero percent and $15K will be taxed at 15%.

These thresholds are obviously different for married filing jointly or head of household.

Mike9241 · ‎March 9, 2026

does that $60k thake into account the reduced basis due to depreciation? if the property is in a state with personal income taxes or you live in a state with personal income taxes, the taxation will vary.

Opus 17 · ‎March 10, 2026

@Mike9241 wrote:

does that $60k thake into account the reduced basis due to depreciation? if the property is in a state with personal income taxes or you live in a state with personal income taxes, the taxation will vary.

Good reminders.

1. Your gain is taxable. Your gain is the difference between the selling price and the adjusted basis. The adjusted basis is what you paid, minus depreciation. Your gain might have nothing to do with the amount of cash you get, such as if you have loans on the property. And the part of the gain that is due to depreciation is always taxed first as recapture, before moving into the calculation for normal capital gains. (But, if you have no other income and are single, you could have up to $15,000 of taxable recapture and still not pay any actual tax.)

2. Most states do not have a special rate for capital gains and you will probably pay the full rate on your state income tax.

susanpbutler · ‎March 12, 2026

$60,000 capital gains after capital improvements, acquisition, closing costs, etc., and it looks like I then have to go back and get tax 25% for depreciation I took over the years on the house? That is a hefty amount. I live in Florida.

Opus 17 · ‎March 12, 2026

@susanpbutler wrote:

$60,000 capital gains after capital improvements, acquisition, closing costs, etc., and it looks like I then have to go back and get tax 25% for depreciation I took over the years on the house? That is a hefty amount. I live in Florida.

Yes. Depreciation is essentially a deduction for "lost" value due to wear and tear. It devalues the property on paper. If you are able to sell for more than the adjusted value, that means you are getting the depreciation back. If you deducted it before, you have to pay it back. Recapture is not necessarily taxed at 25%, it is taxed as ordinary income with a cap of 25%. So if your only income this sale, you get a standard deduction depending on your filing status (single, married, head of household, etc.) and then your ordinary income is taxed at 10% or 12%. You can create a backup account in Turbotax 2025 version, and enter your data to get an estimate of the tax (which assumed the tax law won't change this year, which seems like a safe assumption at this point. Or try this estimator.

TaxCaster tax calculator