When is tax payable on Unrecaptured Section 1250 Gain after sale of rental property?

Forum|Forum|3 years ago
May 22, 2022
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I recently sold a rental property (used as primary residence for 3 of last 5 years and rented out for 2 years). There is no capital gains tax since the capital gain was less than 500k, but I understand I owe tax on the Unrecaptured Section 1250 Gain (since I claimed depreciation on the property for the last 2 years). Do I need to pay that tax when I file my tax returns, or should I pay it this quarter in advance?

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Best answer by Anonymous_

TurboTax will calculate the unrecaptured Section 1250 gain for you. That portion of the gain is taxed at ordinary income tax rates up to a maximum of 25%.

You can make an estimated payment (or payments), but you can avoid a penalty if you do not make estimated payments if:

Your filed tax return shows you owe less than $1,000 or
You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year (110% of prior year tax if the prior year's AGI was over $150.000), whichever amount is less.

See https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

Anonymous_Answer

Employee

TurboTax will calculate the unrecaptured Section 1250 gain for you. That portion of the gain is taxed at ordinary income tax rates up to a maximum of 25%.

You can make an estimated payment (or payments), but you can avoid a penalty if you do not make estimated payments if:

Your filed tax return shows you owe less than $1,000 or
You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year (110% of prior year tax if the prior year's AGI was over $150.000), whichever amount is less.

See https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty