May 10, 2016

Rental Sale Tax Calculator

I found a calculator that figures your tax bill between capital gains, depreciation recapture and medicare tax :

Capital Gain Tax Calculation

Use it for estimation purposes only.

The calculator is hosted by Asset Preservation Inc. who handles 1031 exchanges.     I am not a CPA or anything and I can't attest to the 100% accuracy of the calculator but it looks correct to me.    

We've got a rental property for which my initial investment was about $50,000.   If I sold that property today for $55,000  then my tax bill would be about $4750.   Huh?    Yeah.   Taxes would eat up almost my entire gain.   If our income was significantly higher we'd get hit with the new 3.8% Medicare tax and the bill would be $5548.    I could theoretically have a tax bill that eats up over 100% of our gains.   Yikes!     Well almost all of that is due to depreciation recapture.   I've owned that property for over a decade and would have to repay the depreciation at 25%.   That alone accounts for ~$4500 in taxes.   Remember folks that depreciation on rentals is really just tax deferral.


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