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Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 12705
Experience:  Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
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I am selling a coop that I have been renting out. It is in

Customer Question

I am selling a coop that I have been renting out. It is in Brooklyn NY. What is capital gains rate? I bought for 79,000 and paid off mortgage in 2004 (11% interest). Am selling for $115,000.
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Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Lane replied 1 year ago.

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Expert:  Lane replied 1 year ago.

Hi,

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The mortgage is not important here.

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Capital gain = sales price minus basis

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And basis is purchase price - depreciation for the time rented.

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So, I'll assume that 2004 is when you placed in service for estimating the depreciation.

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(79000 / 27.5) = 2873 per year ... (2016 - 2004) = 2016 - 2004 = 12 years ... So depreciation has reduced your basis by (12 x 2837) = 34044

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SO gain = 115,000 - (79000 - 34044) ... or 70,044

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34,044 of that gain is taxed at the 25% recapture rate (8511) ... the 25% rate is a proxy for the fact that you took (or should have) ordinary income tax deductions for the depreciation

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the the remaining (70,044 - 34044) = 36000 will likely be taxed at 15% so (36000 x .15) = 5400

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5400 + 8511 = 13911

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Long-term gains and qualified dividends taxed at

  • 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 1 year ago.

Hi Pat,

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Did you see my answer?

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Let me know if you need more here

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Lane

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