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TaxRobin
TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 13343
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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I own a rental 2 unit property, married filing separately,

Customer Question

I own a rental 2 unit property, married filing separately, my gain is approx $400k, I hear we have to pay uncle Sam , Is it from the purchase price or from the gain of 400k?
Submitted: 6 months ago.
Category: Capital Gains and Losses
Expert:  TaxRobin replied 6 months ago.

Hello

When you sale rental property you pay tax on the difference in the cost (plus improvements and less depreciation) and the sale price (less costs to sale).

That amount if a gain is taxable. You start with your cost at purchase, add the improvements over time and then subtract the depreciation over the years. This is your BASIS.

If you receive more than your basis you pay tax on that amount.

Customer: replied 6 months ago.
Hi, Ok so I paid $615k for the units, my new sales price is $1,290,000
So how do I determine the depreciation ? what is depreciation, if I could figure this last concern it will give me idea what Irs will want before I decide to sell these units.
Expert:  TaxRobin replied 6 months ago.

Depreciation was shown on your tax return for every year you claimed the rental. Your Schedule E would show this and form 4562.

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