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Old 04-14-2016, 02:37 PM
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Selling an investment property that we used to live in?

We're trying to figure out our tax liability if we were to sell a property. We paid $529k for it in 2005. We lived in it up until 2011 and then rented it out and it's been a rental ever since. We've put roughly $90k into it in improvements since we've owned it. But I believe we've been taking advantage of the depreciation deduction on it every year but I have to confirm that. We are planning to sell it for roughly $550k.

What other info would I need to get before I can get a clear idea of what our tax bill would be after we sell it?



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Old 04-14-2016, 04:25 PM
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We're trying to figure out our tax liability if we were to sell a property. We paid $529k for it in 2005. We lived in it up until 2011 and then rented it out and it's been a rental ever since. We've put roughly $90k into it in improvements since we've owned it. But I believe we've been taking advantage of the depreciation deduction on it every year but I have to confirm that. We are planning to sell it for roughly $550k. =>>>first of all you need to give me depreciation expenses taken in previously years; If you receive a Form 1099-S, you may need to complete Form 4797.however, your adj basis of the pty is roughly 619K before depreciation and say depreciation taken previously since it was placed as rental pty is 100k then your adj basis is 519K and your gain is $31K.unless you take losses on the sale of the rental pty, you must recapture unrecaptured sec 1250 depreciation on form 4797 part I and sch d ; sec 1250 depreciation is taxed as ordinary income. In this presumed scenario you need to capture sec 1250 depreciation up to $31K.so tax ?d be 7750.if your gain is say 200K then your tax?d be 25K+100K *ltcg tax rate based on your Tax rate;however, losses from selling rental properties generally receive favorable tax treatment. Because Section 1231 losses can be used to reduce any type of income you may have - salary, bonus, self-employment income, capital gains, you name it. In addition, you may have a net operating loss if the Section 1231 loss is large enough to reduce your other income below zero. If so, you can carry back the NOL for at least two years and use it to offset taxable income in those years. In doing so, you can recover some or all of the taxes you paid in those previous years by amending those return;losses from selling a personal residence are not deductible. You can only claim tax losses for sales of property used for business or investment purposes. But If you sell the property as your primary residence after you convert it as primary residence,then, you still qualify for that primary residence exemption of $250k or $500k for mfj filer

What other info would I need to get before I can get a clear idea of what our tax bill would be after we sell it?=>>I assume that the pty is exclusively for rental/biz use pty.then, as said above; you need to give total depreciation expenses takenn in previous years .
As said, since your rental property is a home, a Section 1250 property, I mean so you must complete Part III of the form 4797 to determine if you have a gain. Then enter the resulting number on line 32 on line 6 of Part 1The sale of the land is noted in Part I, and you need to enter the sale of the structure there as well if you have a loss. But if you have a gain, the sale goes in Part II.



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