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Can I Avoid Capital Gains Tax on a Sale of Rental Property? Yes. You can purchase it with a retirement account, convert it into your primary residence, or defer the taxes with a like-kind...
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.
When selling a rental property, investors may be subject to various taxes, including capital gains tax, depreciation recapture tax, and potentially state and local taxes. These taxes are based on various factors such as the property’s sale price, adjusted basis, and holding period.
Capital gains tax on rental properties is a tax levied on the profit you make from selling a rental property. It is determined by the difference between the sale price and the property's cost basis, which is the original purchase price plus any improvements made minus any depreciation claimed.
Long-term capital gains tax rates are set at 0%, 15%, and 20%, based on your filing status and income. How Capital Gains Tax Works on Rental Properties.
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%.
How are capital gains calculated on rental property? If you hold rental property, the gain or loss when you sell is generally characterized as a capital gain or loss.