I know, I know...Ask a Tax Pro...

[devo]

He's a little busy at the moment, doesn't want to answer my house questions until next month.

I have a rental house that I'm considering selling. I'm in California, the house is in Idaho. Help me understand how the sale will be taxed?!? I'm just feeling like this is a risky investment. I know it's made money even if it flows slightly negative. Between the distance, and the 10% management fees, I feel like now's a decent time to cut and run. The market in Idaho is still going fairly well.

As I understand it, I take the sale price minus the purchase price (and any selling costs) and pay 15% on that money.
I'll also pay 25% on the depreciation.

Do I have this right? What about state tax? What else should I be considering in this decision?

thanks,
devo
O0

 

[bearkeley]

It's not that simple. General gist is what you described but things like AMT and State Taxes would make a difference. We ended up paying a lot more than 15% (what we expected) because of the AMT. Check out old posts on this...there's quite a bit on this site about this from others. Good luck!

 

[Anansi]

If you have been depreciating the rental, which you should have been doing, then you have to adjust your purchase price down which will increase your profit. And in CA, you will be paying up to 9% to Arnold since any profit is considered ordinary income to the State.