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When selling a rental property, there are 3 main tax components to be aware of: Cost Basis, Capital Gains, and Depreciation. Each is used to calculate the final total amount of taxes due for selling a rental property (if applicable). 1. Cost Basis.
To calculate the taxes owed when selling the rental property we need to make the following calculations: Cost basis: $150,000 purchase price + $1,500 closing costs + $2,500 assessment for street paving – $3,000 amount for granting an easement = $151,000; Value used for depreciation: $151,000 cost basis – $15,000 land value = $136,000
When you sell a rental property, you need to pay tax on the profit (or gain) that you realize. The IRS taxes the profit you made selling your rental property 2 different ways: Capital gains tax rate of 0%, 15%, or 20% depending on filing status and taxable income. Depreciation recapture tax rate of 25%.
Free rental property calculator estimates IRR, capitalization rate, cash flow, and other financial indicators of a rental or investment property.
Rental property ownership has its benefits, but selling can create a big tax hit. Thankfully, there are ways to reduce capital gains exposure.
Owners pay capital gains on rental properties when they sell. Learn how these taxes work and how to reduce what you owe when you sell an investment property.
Use calculator. Get pre-approved. Make sure you understand capital gains tax. Capital gains taxes are the taxes you may need to pay when you sell a rental property for more than what you originally paid for it. Essentially, it’s a tax on the profit you make from selling the property.
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related to: selling rental property tax calculatorbiggerpockets.com has been visited by 10K+ users in the past month