Planning for cap gains + recapture

taxplan2025 · #1 (**permalink**) 07-22-2017, 12:30 PM

For planning purposes, let's say in 2017 I sell a rental property that has 100k of depreciation recapture and 200k of capital gains. If my taxable income during the year of sale is $0, would the sale be subject to 0% rates for both recapture or cap gains? Does AMT kick in for sale of rental property?

Wnhough · #2 (**permalink**) 07-23-2017, 02:36 AM

Quote:

Originally Posted by taxplan2025

For planning purposes, let's say in 2017 I sell a rental property that has 100k of depreciation recapture and 200k of capital gains. If my taxable income during the year of sale is $0, would the sale be subject to 0% rates for both recapture or cap gains? Does AMT kick in for sale of rental property?

For planning purposes, let's say in 2017 I sell a rental property that has 100k of depreciation recapture and 200k of capital gains. If my taxable income during the year of sale is $0, would the sale be subject to 0% rates for both recapture or cap gains?======>no the ltcg of $200K will increase your AGI/Taxable income and your tax rate; and also you need to pay 25% of tax on the unrecaptured sec 1250 depreciation on your return and the other remaining $5100K will be treated as LTCG sec 1231. Taxpayers in the 10 and 15 percent tax brackets pay no tax on long-term gains on most assets; taxpayers in the 25-, 28-, 33-, or 35- percent income tax brackets face a 15 percent rate on long-term capital gains. For those in the top 39.6 percent bracket for ordinary income, the rate is 20 percent. Short-term capital gains are taxed at the same rate as ordinary income.

Does AMT kick in for sale of rental property?====>it depends; Property taxes paid on rental or investment property are allowed in full both for Regular Tax purposes as well as for the Alternative Minimum Tax.however, Several different AMT issues can arise on the sale of rental/investment property. One is that your gain or loss may be different for the AMT than it is for Regular Tax purposes. This would be caused if different depreciation methods were used. For example, if the personal property was depreciated using an accelerated method for Regular Tax purposes, then the basis in that property when calculating gain or loss on sale would be different because the straight-line method had to be used for Alternative Minimum Tax purposes

taxplan2025 · #3 (**permalink**) 07-23-2017, 12:14 PM

Quote:

Originally Posted by Wnhough

For planning purposes, let's say in 2017 I sell a rental property that has 100k of depreciation recapture and 200k of capital gains. If my taxable income during the year of sale is $0, would the sale be subject to 0% rates for both recapture or cap gains?======>no the ltcg of $200K will increase your AGI/Taxable income and your tax rate; and also you need to pay 25% of tax on the unrecaptured sec 1250 depreciation on your return and the other remaining $5100K will be treated as LTCG sec 1231. Taxpayers in the 10 and 15 percent tax brackets pay no tax on long-term gains on most assets; taxpayers in the 25-, 28-, 33-, or 35- percent income tax brackets face a 15 percent rate on long-term capital gains. For those in the top 39.6 percent bracket for ordinary income, the rate is 20 percent. Short-term capital gains are taxed at the same rate as ordinary income.

Does AMT kick in for sale of rental property?====>it depends; Property taxes paid on rental or investment property are allowed in full both for Regular Tax purposes as well as for the Alternative Minimum Tax.however, Several different AMT issues can arise on the sale of rental/investment property. One is that your gain or loss may be different for the AMT than it is for Regular Tax purposes. This would be caused if different depreciation methods were used. For example, if the personal property was depreciated using an accelerated method for Regular Tax purposes, then the basis in that property when calculating gain or loss on sale would be different because the straight-line method had to be used for Alternative Minimum Tax purposes

Thanks! I wasn't making the connection that cap gains does drive up taxable income, even though that income is subject to special rates. Makes perfect sense if I take a step back and just look at the 1040.