Hello again Angela,
If you sell the condo for $250,000 and you paid $85,000 for it, then that gain of $165,000 is taxed at 15% or a total of $24,750. If the amount of depreciation you claimed over the years is $49,500, then you owe tax on that at a rate of 25% or a total of $12,375. So yes, it is correct you would pay a total of $37,125 in taxes.
If you sell if for less you would owe less tax, but the formula is the same -- so you still do not gain anything by selling the property for less money. You end up paying less tax but you also get a lower selling price, so you are still better off to get the highest selling price you can. The percentages of tax you pay stay the same regardless of how much you sell the condo for.
The part that is attributable to deprecation will remain the same regardless of what you sell the condo for. So the $12,375 tax is a given no matter what you sell it for. The other part of the gain (sale price less your basis) is taxed at 15%. So as an example, if you lower the selling price by $10,000 then you save $1,500 on taxes. But at the same time you are getting $10,000 less for the condo, which would not really benefit you.
Thank you JA customer