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the rental income has already been taxed and does not enter into the selling of the property. What you need to look at now is how much depreciation has been taken on the property as this will have to be recaptured. For example, if there had been $21,000 in depreciation taken, selling price $215K less the purchase price of $85K = $130K less $21K in depreciation = $109K taxed at a max of 15% PLUS $21000 taxed at max 25%. Plus any State taxes, if applicable.
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