Have a Tax Question? Ask a Tax Expert
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.The current assessed value will not have any bearing on your capital gain for the sale.You will start with your basis (cost plus improvements). The gain or loss will be decided on the sale price, the difference in basis and sale price will be your gain or loss.
Calculate the adjusted basis of your rental property. The adjusted basis is the purchase price of the property plus any capital improvements you made, Subtract any depreciation you claimed on the property. Subtract the adjusted basis from the sale price of the rental property. On the service it looks like you had a loss of $6060 but the depreciation is going to be used too.
Do I divide 156,060 (plus improvements) by 27.5 years to calculate annual depreciation? Or do I use 156,060 minus land value?
You look at the old tax returns and see what depreciation was claimed.
You would normally have a worksheet that shows each year's depreciation amount.
Is that on Schedule E? If so, what block?
A worksheet would break down each year or
look on Form 4562
The Schedule E will have depreciation sorry
if you have each of those years
The problem with the E though
is that is a total for all items depreciated
Ok. So, my capital gain is calculated by using $150,000 (sale price plus costs associated with sale) minus depreciated value since Sep 2005?
sale price plus costs associated with sale plus capital improvements
Yes with correction above
sale price should read cost price, sorry it is cost plus improvements minus depreciation then the difference in sale (less costs of sale)
$156,060 PLUS improvements MINUS depreciation then you take $150,000 add the sale costs and the difference will be your loss or gain
Ok. Calculating depreciation though is based off property value (minus land value) divided by 27.5 for an annual depreciation rate? And THAT number (let's say $4500) is subtracted annually from original purchase price of $156,060?
So, basically 8 years x $4500 (in my example) = 36,000. 156,060-36,000 = 120,060 (depreciated value). Now let's say I have $13,000 in sales costs (realtor fees, etc.). $150,000-$13,000 = $137,000. My gain would be $137,000 - 120,060 = $16,940. Did I do that correct? Obviously, haven't included any capital improvements which would offset that $16,940.
You will find that a program when doing your tax return will walk you through all the above pretty easily
They normally just ask questions such as cost, any improvements, sale price and so on
then teh program will do the calculations for you and carry all to the appropriate forms
Yeah, I've used turbotax every year. It seems pretty good, but wanted to get an idea of how much I might get stuck with. Sounds like it might not be much since I've had over$10,000 in improvements (capital).
Just make sure you retain copies of everything
Definitely. Ok, not the answer I was WANTING (I was hoping tax assessed value would play into the mix) but you've been very helpful. Thank you! I don't suppose being active duty military changes anything does it?
Not due to the selling of rental property
shoot! haha Thanks again! I think that answers everything.
Had you not used for rental you could have extended your use time of the property if it was miliatry related
You are most welcome
I really enjoyed working with you – please feel free to request me again when you come back to ask another question.
Oh wait one more...does it matter that it has been vacant for the past year? not a rental?
no, except you would continue with depreciation til date sold
Ok. Thanks again! That's all...(I think). Have a good day!
Do the rental portion first then TT will ask if you sold
Your positive rating is always thanks enough.
Ok...I will. Thanks for the tip.
Glad to assist