Question

Long term capital gains

Forum|Forum|4 years ago
July 24, 2021
2 replies
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I'm selling a rental property and I'll be profiting around $125k.

My income puts me in the 0% capital gains bracket, but from what I'm understanding I would still need to pay 15% on any profits that brings my income past $40,400. This is if I dont do the exchange of course. Do I have this right or no?

Thank you in advance!

Not A Product Question

Critter-3

Ok... you really need to talk to somebody locally to discuss this correctly. Your "profit" will have some depreciation recapture which is taxed as ordinary income at a rate not to exceed 25% and if you have not been properly depreciating the property over the years then RUN for professional assistance so you are not double taxed ... this is not a DIY project and TT will not handle it at all.

Hal_Al

Employee

Q. From what I'm understanding I would still need to pay 15% on any profits that brings my income past $40,525 (2021 number). Do I have this right or no?

A. Yes, but not exactly. The $40,400 amount is taxable income, not your total income or even your AGI. Assuming you get a $12, 550 standard deduction, it's essentially you pay 15% on any profits that brings your income past $53,075. But the depreciation recapture portion of the gain is taxed as ordinary income, not the 15% capital gain rate (probably 22%, but not more than 25%).