I'm thinking about selling some rentals I've never lived in. The gains won't be that high so I'm considering just selling and paying the gains tax. My question is: is that calculated on the difference between the prices (plus the depreciation recapture) or can I subract out excise tax, fees and commissions? What if I am the agent?
2007-10-04 15:06:13 · 4 answers · asked by shaakon1 1 in Business & Finance ➔ Taxes ➔ United States
Yes, you can subtract your costs to sell such as transfer taxes, escrow fees and commission to determine your capital gains. Have you considered the recapture of depreciation at 25%?
Do you have to collect a commission? Commissions are ordinary income tax whereas capital gains are a preferential tax item (lower rate of 15%).
If you are interested in deferring the gain, then try a 1031 tax deferred exchange. It seems like a buyers market and there are actually properties out there than have cash flow. There are sydicators out there which will selll you a portion of an investment property to complete your exchange.
2007-10-05 05:58:22 · answer #1 · answered by William H 5 · 0⤊ 0⤋
The issue actually goes a little beyond that - when people start worrying about taxes and that affects their financial decision making, it has a negative effect on the economy. If I choose to sell my house, there is a flurry of economic activity that results. I may decide to paint rooms, re-tile kitchens or bathrooms, fix the roof, do some landscaping. This employs people - salesmen, tradesmen, delivery people ... When I put my house on the market, I employ a realtor - I employ the publishers of web sites, of multiple listings magazines, of appraisers. If someone is interested in buying my house they may hire an engineer to inspect the mechanicals - they apply for loans, they move money around in their bank accounts or other investments - they employ movers, painters, tradesmen ... On the other hand, if I decide that the capital gains tax is too high, I may just stay put, and all that activity comes to a grinding halt. The capital gains tax also affects the other side of this kind of transaction. Perhaps I have been saving for many years in a mutual fund or a TD Ameritrade account, for the day that I can finally afford to buy my own house. Maybe my savings have grown over the years - but if I sell now, I'll get hit with a high capital gains tax, which may not leave me with enough money for my down payment. This is not about the rich - this is about the government meddling with free-market economic activity.
2016-05-21 02:58:30 · answer #2 · answered by ? 3 · 0⤊ 0⤋
For a rental, the profit is computed on the sales price minus your tax basis and costs of sale. This is ordinarily the cost minus depreciation.
2007-10-04 15:10:13 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Yes you can subtract the sellling costs. If you're the agent and a commission is paid to your agency and you end up with part of it, then the amount paid can still be deducted, but the amount you receive would of course be taxable income to you
2007-10-04 15:20:27 · answer #4 · answered by Judy 7 · 0⤊ 0⤋