AUGUST 2015 - REAL ESTATE & HOME BUILDERS GUIDE - PAGE 21
Taxes on sale of investment property
Tribune Content Agency
-- July 2, 2015
claiming that you have a loss
on the sale of the property.
The
real
question
is
determining what the “basis”
is for the property to
determine what the profit is.
Basis in non-tax jargon usually
means what the property cost
you plus any improvements
and the depreciation you took
on the property over the years.
Depending on where you end
up, the taxes you end up
paying could be minimal --
that is to say, if you are truly
selling the property at a loss,
the loss could offset any taxes
that you may owe.
By Ilyce Glink and
Samuel J. Tamkin, Tribune
Content Agency
Q
: We have owned a
property in Florida for
about 10 years and have rente d
it out to tenants on a long-
term basis. The home is a true
rental and is not a vacation
home. We have been taking
depreciation on our tax
returns since we purchased it.
Here’s our question: Upon sale
of the property (likely at a
loss), how is the accumulated
depreciation handled for
federal tax purposes?
As you can see, your question
seemed straightforward, but
your specific circumstances
might
make
it
quite
complicated. Given all of this,
we go back to telling you to
talk to an accountant or tax
professional that handles real
estate investments to go over
all of the issues with you.
A
: You need to know that
we are not accountants
and that we’d advise you to
talk to an accountant to go
over your specific issues.
When it comes to investment
property, you need to have a
person that knows the ins and
outs of real estate investments,
your personal finances and the
many issues that you might
come across.
Having said that, in general, if
you have taken depreciation
over the years, you are
required to repay that
depreciation when you sell at a
rate of 25 percent. That means
that if you took $100,000 in
depreciation on a property
over the last number of years
and you now sell, you owe the
federal government $25,000.
On the other hand, if you sell
the property at a profit, you
may also owe federal income
taxes on the gain you have on
the sale of the property.
Depending on whether the
sale if long term or short term
capital gains, you will have to
pay between 15 percent and
up to 40 percent on the gains
from the sale of the property.
Lastly, in many situations, the
Affordable Care Act also
requires an additional tax on
the sale of investment real
estate at around 3.8 percent.
In
your
situation,
you’re
(Ilyce Glink is the creator of
an 18-part webinar+ebook
series called “The Intentional
Investor: How to be wildly
successful in real estate,” as
well as the author of many
books on real estate. She also
hosts the “Real Estate
Minute,” on her YouTube
channel. Samuel J. Tamkin is a
Chicago-based real estate
attorney. Contact Ilyce and
Sam through her website,
ThinkGlink.com.)
(c) 2015 ILYCE R. GLINK
AND SAMUEL J. TAMKIN.
DISTRIBUTED BY TRIBUNE
CONTENT AGENCY, LLC.