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TaxRobin
TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 13317
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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My husband sold s rental house in Texas this year ,500. The

Customer Question

my husband sold his rental house in Texas this year for 47,500. The house was purchased for $40,000 in 1980 and has never been occupied by him. He co-owned the house with family members and the house became a rental approximately 27 years ago. The house has been written off as a rental property for those 27 years. I paid off a 20k mortgage on the house several years ago so there is no longer a loan. What can we expect to pay in capital gains taxes?
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  TaxRobin replied 1 year ago.

Hello

The tax will be on the gain. The difference in cost (plus improvements less depreciation) and the sale price less costs to sale.

You said he co-owned so only his percentage of the above are used in his calculations. The depreciation claimed over the years may need to be recaptured. Recapture is when you have a gain on the sale and the amount claimed as depreciation is taxed at regular rate of tax. This is because depreciation lowered taxes in the past years but the property did not decline in value when sold.

Because the house was "written off" most likely up to the entire $40,000, his percentage of the sell amount (based on his percentage of ownership) will all be taxable.

The tax on the gain will be determined by your regular rate of tax and a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gains. You have to look at your regular income to determine that though.

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