I sold a rental property for 95k bought it for 55k. I have another rental property that I still owe 30k. Can I take the profit from the sold property and pay off the rental and not pay taxes on that 30k. Also can I take the 10k left over and pay on my residence to avoid paying taxes on that.
2007-10-27 04:32:24 · 7 answers · asked by KT58 1 in Business & Finance ➔ Taxes ➔ United States
No!! None of those things are possible. Also you will have more gain than the difference between 95k and 55k. For each of the years that you have been renting the property you have or could have taken depreciation. The total of that depreciation will decrease your basis in the property and increase the taxable gain. Determining the proper gain on a rental property can be difficult. There are a number of other issues that may effect the gain. You may wish to ask a tax professional to do this years return.
2007-10-27 04:51:36 · answer #1 · answered by ? 6 · 1⤊ 0⤋
Sorry, but it doesn't work that way.
Your gain on the sale of the rental property is probably more than the difference between the cost and the sales proceeds. You must also recapture any depreciation allowed OR ALLOWABLE while the property was rented out. Even if you didn't take a depreciation deduction, you MUST recapture an amount equal to what you could have claimed.
For example, if you took $10k in depreciation or could have taken that much, you MUST reduce your basis by that amount. That would reduce your basis to $45k and result in a taxable gain of $50k. That gain is fully taxable regardless of what you do with it. If you held the property for over one year it would be taxed as a long-term capital gain. The tax rate on that is normally 15% unless your marginal rate is already 15% or less in which case it would be 5%.
Again, what you do with the gain will have no affect on the taxes you'll pay on it. Using it to pay down an existing debt on another property is a wise financial move but won't save you 10¢ in taxes.
2007-10-27 05:57:47 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
Understand that being debt free is a good thing even if you have to pay taxes on the events that bring you there.
On the 1st property you will have a 40K gain taxed at a maximum 15% because you probably owned it more than a year. In addition you will have to recapture the deprecation that you took or should have taken taxed at a maximum 25%. These rates could be lower, depends on your other income. I would suggest consulting a tax professional this year or at a minimum buy tax software. These are complex computations and should be done with software to get the math right.
The rest of your profit can be spent any way you wish and paying down debt is a great idea. There will be no tax due because you haven’t sold the other property or you home.
The most successful real estate investors I know have a lot of equity in their properties so a down turn in the market is survivable for them because a vacancy won't kill them.
Don’t forget to consult the IRS or a tax professional when you sell so you can figure out how much estimated tax you will owe. If you don’t make estimated tax payments when required you will probably be subject to a penalty.
2007-10-27 05:52:15 · answer #3 · answered by Charlie & Angie G 4 · 0⤊ 0⤋
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2016-07-19 16:39:13 · answer #4 · answered by ? 3 · 0⤊ 0⤋
You do not pay any taxes on the remaining debt on your home or the rental property you now own. Paying off those debts does not change any tax that you pay now or in the future.
You pay taxes on the gain of the sale of property, without regard to how much debt you have on the property. The gain is the difference between the sales price and your investment in the property adjusted for depreciation.
For the rental property, you have a gain and will pay taxes on that gain regardless of how you use the money you receive. When you sell the second rental property, you will pay taxes on that gain.
The gain on the sale of your residence can be excluded from taxes up to $250K ($500K if married) as long as you live in the home for 2 of the 5 years preceding the sale.
2007-10-27 05:51:56 · answer #5 · answered by ninasgramma 7 · 0⤊ 0⤋
when you consider which you would be merchandising your apartment for under the acquisition value, the undeniable fact that it became used as a suitable place of abode is beside the point. the respond on your question relies upon on the "foundation" of your belongings. the muse relies upon on the acquisition value of the apartment, the honest marketplace value of the apartment whilst it became converted to a condominium, any advancements earlier or after it became converted to a condominium belongings, and how long that is been a condominium belongings. it is not accessible to tell you with out this information. occasion based on your information: Say the FMV of the apartment once you all started renting it became $one hundred forty,000 and you sell it for $a hundred thirty,000. you will possibly have taken approximately $5,000 depreciation, so your foundation is $a hundred thirty five,000. you have a loss of $5,000. it is declared on form 4797. in the journey that your unique foundation is nearer to the revenues value, you may alright have a earnings as pronounced in different solutions. as a manner to be conscious of what your tax implications are, seek for suggestion from with a tax guy or woman earlier the sale.
2016-10-14 05:01:24 · answer #6 · answered by ? 4 · 0⤊ 0⤋
Rent-To-Own Home - http://RentToOwnHome.uzaev.com/?HfOz
2016-07-12 08:39:17 · answer #7 · answered by ? 3 · 0⤊ 0⤋