Assuming you are not doing a 1031 exchange, does anyone have a method to calculate your gain? I think I have it sort of figured out but need a second set of eyes to figure out the tax side of it.

Original price lets say $100,000

add improvements $25,000

minus depreciation taken $50,000

so adjusted book value would be $75,000

Sale price $200,000

less closing costs $20,000

So net is $180,000

minus adjusted book value $75,000 gives you $105,000 of profit .

So what gets taxed and at what rate? I was thinking that gain get taxed at 20% but the depreciation you took get taxed at your tax rate. I'm confused at this point.

Any accountants here? Who's the tax guru?

100K + 25K rehab = 125K cost basis

If you claimed 50K in depreciation according to the IRS schedule (I'm guessing you owned this for over 10 years?) that is value that you recapture at the time of sale.

Net at time of sale is 180K PLUS 50K in recapture = 230K. I'd guess it's all taxed at the long-term capital gains rate.

But I'm not a CPA. Spend the $80 for TurboTax and it will walk you through everything.

Gain? I thought this was about gaining weight during quarantine! We call it The Covid 19 (pounds)!

BRAD

50k depr is taxed at 25%

remainder of gain is taxed on sliding scale from 0$ to 20% depending on your total income.

Dont forget state tax.

A recent 1031 ......I posted ........ CALL THE PRO

1 email to my accountant and he would send back to me exactly what I would owe on any particular transaction

You need an accountant and lawyer on your virtual staff. There are as important to your long term success as any plumber, electrician or handyman

May I suggest the second set of eyes should be a CPA.

I learned a long time ago that a good - some or better than others - CPA is a very valuable part of a wealth management team.

So Marv (IL) is the winner of the chicken dinner!!!

Here's the answer from the CPA

You would be taxed on your profit of $105,000. If you held the property for over a year, this transaction would be treated as a long-term capital gain. You could be taxed up to 20% on roughly $55,000 of the profit and roughly $50,000 could be taxed at 25%.

Good answer Marv, based on current tax law.

Long term capital gains has varied depending on the tax law. Depreciation recapture taxed at 25% has been around a long time. Too bad when we wrote off our depreciation we were in the 15% tax bracket...