It really depends on your tax bracket,

- quote -

That establishes your profit.

If you are in the 15% of lower tax bracket the tax on the sale is 5%.
If you are in the 25% or higher tax bracket your tax is 15% of the
profit plus an additional 10% on any amount of your depreciation. ed

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Joe Meadors wrote:

- quote -

See the IRS Form and instructions for the 1040-ES.
http://www.irs.gov/formspubs/lists/0,,id=97817,00.html

--

Alan
http://taxtopics.net

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joemeadors[at]gmail.com (Joe=A0Meadors) posted:

- quote -

In fact, there is. While I'm personally uncertain of the
"rules" in 1978, the standard for many years has been that
rental property must be depreciated over a 27.5 year period.

Thus, the period 1978 - 2005 (27 years) means that you will
have virtually used all of your depreciation. Your cost
basis for the entire property will be virtually the cost
(value) of the land, which you should have excluded from
your depreciation. All of the remainder will be long-term
capital gains, which is taxed at a 15% rate. _However_, the
amount of that gain which you had previously written off as
depeciation will now be "recaptured."

This is classified as a "section 1250" gain, and can be
calculated on the Unrecaptured Section 1250 Gain Worksheet
in the Schedule D Instructions. The tax rate on this
portion of your gain will be 25%.

So, you should be able to quickly figure the approximate
total taxable on your sale of that long-owned rental
property.

Bill

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Joe Meadors wrote:

- quote -

Grab an extra form 1040 and plug in your projected figures
for each item , including sale of house and recapture of
depreciation. Remember, all income items, not just the house
sale.

You'll come close enough.

ChEAr$,
Harlan Lunsford, EA n LA
Sun 30 Jan 2005

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Joe Meadors <joemeadors[at]gmail.com> wrote:

- quote -

Your gain is more or less the difference between net sales
and adjusted cost basis.

Adjusted cost basis is what you paid plus improvements less
allowed or allowable depreciation.

Assuming this property was held more than one year (if not,
all gain is taxed at the ordinary income rate) the different
types of property will be taxed at different rates. Report
sale on Form 4797.

The building itself is Sec 1250 property. The gain on sale
attributable to the allowed or allowable depreciation is
treated as Unrecaptured Sec 1250 gain on Foerm 4797 and
Schedule D and worksheets. The maximum tax rate for
Unrecaptured Sec 1250 gain is 25%.

Since you began the rental before MACRS was applied, if you
used an accelerated method of depreciation, the difference
if any, between the depreciation taken and the straight line
method of depreciation, is taxed as ordinary income. But
chances are by now the house is fully depreciated and
there's no such difference to be found. If so, ignore his
paragraph.

The gain on sec 1231 property like the land the house sits
on is taxed at not more than 15%. And any gain on sale of
any Sec 1245 property, perhaps a refrigerator, is taxed at
ordinary income rates.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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My wife and I bought a house in 1978.

We lived in it for a year then rented it out.

This year (2005) we sold it.

Is there an easy way to estimate our Federal Tax liability?

Thanks in advance.

Joe Meadors

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