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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11823
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I own rental property which I want to sell, but according to

Customer Question

I own rental property which I want to sell, but according to my tax person I used all the deprecation on the property. Can I just pay the capital gains tax without any deductions
so if I sell my house then I would be able to use the deduction for the capital gains tax?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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Woud you mind re-stating your question?

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I'm not I completely understand. ... If the house IS a rental then the depreciation does lower the tax basis in the property, thereby raising the size of the gain.

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Also, becasue you got the tax deductions along the way (or should have taken them, one of the bigger IRS "gotcha's" out there recapturing that depreciation whether you took it or not) there is a special rate for that PART of the gain; 25%.

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The tax policy/logic here is that, becasue you got a deduction for ORDINARY income, the depreciation part of the gain is taxed at 25% as a proxy (an average, a substitute) for the deductions you were able to get against ORDINARY income.

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THe REST of the gain will be taxed at the lower long term capital gains rates:

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0% if taxable income falls in the 10% or 15% marginal tax brackets15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets20% if taxable income falls in the 39.6% marginal tax bracket(and again, 25% on Depreciation Recapture)
    ...Have I understood your question correctly?
Expert:  Lane replied 1 year ago.

Please let me know if I've not understood your question OR if you have any other questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit")

JustAnswer will not credit me for the work unless you do.

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Thank you!

Lane

I have a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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