If I sell a rental property for 85,000 and I owe 52,000, my gross profit is 33k. How much would I pay in taxes?
The property is a single family home in South Carolina if that makes any difference. And I would use a real estate agent.
4 thoughts on “If I sell a rental property for 85,000 and I owe 52,000, my gross profit is 33k. How much would I pay in taxes?”
stingray
31/3 % taxes you can negotiate your commission
glenn
The taxable profit is based on how much you originally paid for the house and how it has been treated on your tax return over the years. You get to adjust based on various other charges including the commission.
If you plan on replacing it with another rental property right away you can delay paying the taxes- talk to your accountant (you will need one).
Spock (rhp)
what glenn is alluding to is a “like-kind” exchange. the sale part of such an exchange is not taxable, BUT ONLY IF you follow the rules for them EXACTLY.
some of the rules are: [this may not be all of them]
1. you must identify a replacement property within a specified time of the sale’s close
2. you must actually close on the replacement property within a longer specified time
3. you may not personally take possession of the proceeds of the sale at any time
real estate investors who plan to do this usually hire a service firm to hold the cash and track the details.
***
the cost basis of a rental property is the original cost, plus additions over the years owned, less retirements [at cost] over the years owned, and then adjusted for depreciation “allowed or allowable” [quote from relevant tax law].
depending on what was depreciated and sold in the package of assets called a rental property [appliances?], some of the depreciation may be subject to recapture as ordinary income [if you are apparently selling at a profit] and would then reduce the amount of the capital gain to be reported.
fortunately, your tax accountant has been keeping track of all these elements over the years and thus she or he will be able to prepare the necessary schedules fairly easily [for a fee, of course].
right?
teran_realtor
Glenn and Spock are talking about a “1031 tax exchange”. It means that you sell a certain kind of real estate, but replace it with a similar “kind” of property.
If you think you want to do this, it is SUPER important that you get this started BEFORE selling the first house. The part that Spock said about not receiving the money yourself is key as far as the IRS is concerned. From the closing (sale) of the current house, the money does NOT go to you or your account. It goes to a (I forget what it’s called) certified “exchanger?”. That person holds the money until you get to close on the replacement property.
31/3 % taxes you can negotiate your commission
The taxable profit is based on how much you originally paid for the house and how it has been treated on your tax return over the years. You get to adjust based on various other charges including the commission.
If you plan on replacing it with another rental property right away you can delay paying the taxes- talk to your accountant (you will need one).
what glenn is alluding to is a “like-kind” exchange. the sale part of such an exchange is not taxable, BUT ONLY IF you follow the rules for them EXACTLY.
some of the rules are: [this may not be all of them]
1. you must identify a replacement property within a specified time of the sale’s close
2. you must actually close on the replacement property within a longer specified time
3. you may not personally take possession of the proceeds of the sale at any time
real estate investors who plan to do this usually hire a service firm to hold the cash and track the details.
***
the cost basis of a rental property is the original cost, plus additions over the years owned, less retirements [at cost] over the years owned, and then adjusted for depreciation “allowed or allowable” [quote from relevant tax law].
depending on what was depreciated and sold in the package of assets called a rental property [appliances?], some of the depreciation may be subject to recapture as ordinary income [if you are apparently selling at a profit] and would then reduce the amount of the capital gain to be reported.
fortunately, your tax accountant has been keeping track of all these elements over the years and thus she or he will be able to prepare the necessary schedules fairly easily [for a fee, of course].
right?
Glenn and Spock are talking about a “1031 tax exchange”. It means that you sell a certain kind of real estate, but replace it with a similar “kind” of property.
If you think you want to do this, it is SUPER important that you get this started BEFORE selling the first house. The part that Spock said about not receiving the money yourself is key as far as the IRS is concerned. From the closing (sale) of the current house, the money does NOT go to you or your account. It goes to a (I forget what it’s called) certified “exchanger?”. That person holds the money until you get to close on the replacement property.