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Ask USTaxAdvising Your Own Question
USTaxAdvising, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 1237
Experience:  Professional in capital gains and finance related questions
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I sold a rental house in November for $196,000. Purchase

Customer Question

I sold a rental house in November for $196,000. Purchase price in 2002 was $139,000
Trying to figure out my tax on this
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  USTaxAdvising replied 1 year ago.

Hi Joe,

In order to determine the tax on the rental I need to know what you anticipate your taxable income to be for the year before the sale. I would also need to know how much depreciation you have claimed in total over the life of the rental as the depreciation is required to be recaptured and taxed at a rate of 25%.

Given the straight gain on sale of 57,000 and assuming it will be taxed federally at 20% I get a total tax (estimated) 11,400. Unless you are in a high tax bracket and also live in a state that will tax the sale, I would be inclined to agree that the tax seems high as outlined by your CPA.

Let me know if I can assist further and I will get back to you as soon as I can.

Best regards,

Customer: replied 1 year ago.
I live in Texas, and over the course of time I owned the property I would estimate depreciation to be no more than $20,000. I assume depreciation is the expenses related directly to the rental property. And for tax year 2014, our income filing jointly was just under $100,000. We own our own business, and had a large increase last year. Perhaps our CPA is estimating for another one this year, but it won't put us more than $140,000 for the year.
Expert:  USTaxAdvising replied 1 year ago.


OK it definitely sounds like you will be in the 25% tax bracket therefore the gain will be taxed at 15% (less the 25% depreciation recapture). I see the total tax as being as follows:

Total Gain 57,000 Total Tax

Less: Deprecation Recapture (20,000) * 25% = 5,000

Long Term Capital Gain 37,000 * 15% = 5,550

Total Federal Tax 10,550