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TaxRobin
TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 13609
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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I sell my rental property for $440.000 dollar. I was told

Customer Question

I sell my rental property for $440.000 dollar. I was told that I will have to pay 50%
capital gain. House was purchase in 1971 for $36,000 , spend appr. $136.000 during
the 46 years ( roof, windows, aircond., driveway, waterheater,chimney repair,addition
to the house ).Have been a rental property since 1990.
How is the capital gain calculation works. Do I have to pay taxes on present
selling price minus original price ?
Submitted: 7 months ago.
Category: Capital Gains and Losses
Expert:  Lane replied 7 months ago.

Hi,

...

Capital Gain = Sales price - Basis

...

And, Basis = (purchase price + improvements - depreciation)

...

As since you've held the property for more than a year, you will get the lower Long Term Capital Gains rates (which ARE dependent on your ORDINARY marginal tax brackets)

...

Long-term gains are at the following rates, progressively:

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket
  • 25% on Depreciation Recapture
Expert:  Lane replied 7 months ago.

So, as you can see the rate that you will pay is dependent on your TOTAL taxable income for the year of sale ... which includes your other household income as well.

...

If you'd like to give me (1) your other household income, (2) when you started renting the home (so that I can clculate the depreciation portion of basis) and (3) how you file (married, single, etc), I can run the numbers for you.

Expert:  Lane replied 7 months ago.

If this HAS helped, and you DON’T have other questions, or want a projection… I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit")

JustAnswer will not credit me for the work unless you do.

...

Thank you!

Lane

I have a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Expert:  Lane replied 7 months ago.

P.S. I'd also neeed the market value of the house when you started renting it in 1990

...

I'll be here

...

Lane

..

Expert:  Lane replied 6 months ago.

Hi,

...

I’m just checking back in to see how things are going.

...

Did my answer help?

...

Let me know…

...

Thanks

Lane

Customer: replied 5 months ago.
Expert:  TaxRobin replied 5 months ago.

Hello

Because you requested a new expert I am responding.

The rental property is going to be taxed on it's gain.

You take the original purchase price, add the improvements , and subtract the depreciation.

That amount is your BASIS.

The gain or loss is going to be the difference in BASIS and the sell amount less the cost to sell.

I can tell you have a gain just by looking at your numbers.

You are going to have to use form 4797 to report this because it was rental.

If someone told you that you have to pay 50% they most likely were looking at the 20% for your regular tax and the 25% on the Depreciation recapture.

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