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Are you familiar with Capital Gain taxes on rental property?

Are you familiar with...

Are you familiar with Capital Gain taxes on rental property?

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I bought a 2 unit rental property 33 years ago for 50K and lived in half of it for 25 years. Eight years ago I moved out and rented both units. I would like to sell it now for 140K. How do I figure my cost basis and what my gain would be?

Accountant's Assistant: Is there anything else important you think the Accountant should know?

How does what I depreciated over the years affect the basis?

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10/27/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,973
Experience: Taxes, Immigration, Labor Relations
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You need to calculate the basis separately for each unit.

-- Unit one that you used as your personal residence

- original basis is your purchase price $50K / 2 = $25k

- minus depreciation allowed or allowable for 8 years

- plus improvement expenses

That will be your adjusted basis for that unit.

-- Unit #2 that was rented should be fully depreciated

- because residential rental is depreciated over 27.5 years

- so unless you have unrecovered improvement expenses which you capitalized - your adjusted basis is zero

the gain = $140K(selling price) MINUS (adjusted basis from above)

Let me know if you need any help with reporting.

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Customer reply replied 7 months ago
would 15% of the 140K be added to my taxes?

Not exactly...

not the full selling price but only the GAIN is added to your other taxable income.

while you are correct - because the property was owned more than a year - that gain is taxed at reduced long term capital gain rate - your tax liability is calculated based on your total income - and there is a special worksheet to use when the tax liability is calculated.

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Customer reply replied 7 months ago
Thanks

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If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all Social Security / Tax related issues.

Lev
Lev, Tax Advisor
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Satisfied Customers: 32,973
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