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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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capital gains

Customer Question

how much capital gains tax will i pay on my 3 family rental property if i bought it for 17,900 and sell it for 600,000
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

Capital gains are defined as the difference between your net selling price (i.e. contract sales price less selling expenses such as commissions, etc.) and your adjusted cost basis (i.e. original purchase price plus improvements less allowable depreciation.


Thus, without considering depreciation or selling expenses and assuming you have held the properties for more then one year, you would initially have gains on the sale of your properties totaling $582,100 (i.e. $600,000-$17,900). You would generally be subject to a maximum tax rate of 15% meaning your Federal taxes would approximate just over $87,000.


However, the final tax figures will be somwhat different ($5,000 either way) depending on your selling expenses, any fix-up costs as well as the depreciation you took.


Also, depending on the depreciation method you used you may have some depreciation recapture. This means that some of your gain may be treated as ordinary income to the extent the depreciation you took exceeded a depreciation figure calculated by the straight-line method.


If you live in a state with income taxes your gain will also be subject to state tax.

Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 2 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
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