Capital Gain / Depreciation Recapture Question
JW
Suppose I have a Capital Gain Tax loss of $11,000 and I have a Depreciation
Recapture Tax of $36,000 for the year I sell an Investment Property.
Is the combined tax liability for this year $36,000 - $11,000 = $25,000, or
$36,000 - $3,000 = $33,000?
In other words do I have to use the $3,000 maximum loss this year an roll
the remaining loss of $8,000 over to subsequent years or can I offset the
Recapture Tax with the full $11,000?
Thanks,
JW
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LoTax
> Hi,
>
> Suppose I have a Capital Gain Tax loss of $11,000 and I have a Depreciation
> Recapture Tax of $36,000 for the year I sell an Investment Property.
> Is the combined tax liability for this year $36,000 - $11,000 = $25,000, or
> $36,000 - $3,000 = $33,000?
>
> In other words do I have to use the $3,000 maximum loss this year an roll
> the remaining loss of $8,000 over to subsequent years or can I offset the
> Recapture Tax with the full $11,000?
>
> Thanks,
> JW
>
JW, do you have "depreciation recapture" of $36,000, or do you have an
"unrecaptured section 1250 gain" of $36,000? You've asked a good
question, but you've garbled the technical terminology, and an answer
isn't available the way you've asked the question...
Mark Bole
>> Suppose I have a Capital Gain Tax loss of $11,000 and I have a Depreciation
>> Recapture Tax of $36,000 for the year I sell an Investment Property.
>> Is the combined tax liability for this year $36,000 - $11,000 = $25,000, or
>> $36,000 - $3,000 = $33,000?
> JW, do you have "depreciation recapture" of $36,000, or do you have an
> "unrecaptured section 1250 gain" of $36,000?
Probably the latter. Not to mention that investment property is not
depreciated....
In any case, I believe the answer is found by starting with the
"Unrecaptured Section 1250 Gain Worksheet" in the instructions for
Schedule D, Form 1040, and then working through the rest of Schedule D.
-Mark Bole
JW
"Mark Bole" <ma...@pacbell.net> wrote in message
news:hhddm4$29d$1...@news.eternal-september.org...
> LoTax wrote:
>
>>> Suppose I have a Capital Gain Tax loss of $11,000 and I have a
>>> Depreciation
>>> Recapture Tax of $36,000 for the year I sell an Investment Property.
>>> Is the combined tax liability for this year $36,000 - $11,000 = $25,000,
>>> or
>>> $36,000 - $3,000 = $33,000?
>
>> JW, do you have "depreciation recapture" of $36,000, or do you have an
>> "unrecaptured section 1250 gain" of $36,000?
>
> Probably the latter. Not to mention that investment property is not
> depreciated....
>
> In any case, I believe the answer is found by starting with the
> "Unrecaptured Section 1250 Gain Worksheet" in the instructions for
> Schedule D, Form 1040, and then working through the rest of Schedule D.
>
I'm trying to estimate the tax liability on a rental property and during my
search on the Internet ran into a web site that had a calculator that gave
this information.
At the bottom the calculator shows the total 11K being subtracted from the
taxes due.
Calculate Net Adjusted Basis:
Original Purchase Price $ 450,000
plus Improvements +$ 28,645
minus Depreciation -$ 144,460
= NET ADJUSTED BASIS =$ 334,185
2. Calculate Capital Gain Sales Price of Property:
Sales Price $ 430,592
minus Net Adjusted Basis -$ 334,185
minus Costs of Sale -$ 25,835
= Capital Gain =$ 70,572
3. Calculate Capital Gain Tax Due:
Recaptured Depreciation (25%) $ 36,115
plus Federal Capital Gain Rate (15%) +$ -11,083
plus State Capital Gain Rate: (0%) 0
= TOTAL ESTIMATE TAXES DUE =$ 25,032
I appreciate your helping
Alan
depreciation?
Wallace
"JW" <j...@ungodly.net> wrote in message
news:qcydnaJSScZs06fW...@earthlink.com...
It seems you have held this property for quite a few years. Has the
non-depreciable portion(s) of the property (i.e. the land) gone up in value?
If so, you may have less depreciation to recapture than you think.
JW
"Alan" <sfcn...@yahoo.com> wrote in message
news:hhdpbm$5ma$1...@news.eternal-september.org...
I apologize if this is a duplicate post -- I thought I sent a similar post
before -- but it did not show up here or in my sent box.
The online calculator did not show the step where it subtracts the 144460
from the 70570 gain to come up with a -73888 loss which is then multiplied
by 15% to get a -11083 capital loss.
I don't know whether it is permitted to supply the link to the calculator.
My question still is is that 11083 subtracted from the 36115 to obtain my
tax liability or can I only offset it by 3000.
The calculator shows the former.
Thanks,
JW
JW
"Wallace" <please...@microsoft.com> wrote in message
news:hhe04d$iir$1...@news.eternal-september.org...
No. the numbers are correct.
I have come up with another question. I have been searching the Internet to
see if I can figure this out. Some sites mention a "special tax rate" of
25% to calculate the Depreciation Recapture while others state that the
Depreciation Recapture is taxed as ordinary income. Which is it?
Thanks for the responses.
JW
Alan
subject to ordinary income tax. What you have is unrecaptured
section 1250 depreciation of $70572 that goes on Line 19 of
Schedule D. You then use the the Sched D Tax worksheet to perform
your tax calculation. That will tell you how much of the 70572
will be taxed at 25%. We can't give you an answer because we have
no idea what else is on your tax return.
Phil Marti
> I have come up with another question. �I have been searching the Internet to
> see if I can figure this out. �Some sites mention a "special tax rate" of
> 25% to calculate the Depreciation Recapture while others state that the
> Depreciation Recapture is taxed as ordinary income. �Which is it?
Both. It's taxed as ordinary income at a maximum rate of 25%. Which
is why people are telling you that there's no way you can isolate this
from everything else on your return. As has been suggested, work your
numbers through Schedule D and the tax computation worksheet.
Phil Marti
Clarksburg, MD
JW
BIG SNIP
>
> If you used straight line you have no additional depreciation subject to
> ordinary income tax. What you have is unrecaptured section 1250
> depreciation of $70572 that goes on Line 19 of Schedule D. You then use
> the the Sched D Tax worksheet to perform your tax calculation. That will
> tell you how much of the 70572 will be taxed at 25%. We can't give you an
> answer because we have no idea what else is on your tax return.
I appreciate all of your responses. It seems then that the calculations
should be:
Calculate Net Adjusted Basis:
Original Purchase Price $ 450,000
plus Improvements +$ 28,645
minus Depreciation -$ 144,460
= NET ADJUSTED BASIS =$ 334,185
2. Calculate Capital Gain Sales Price of Property:
Sales Price $ 430,592
minus Net Adjusted Basis -$ 334,185
minus Costs of Sale -$ 25,835
= Capital Gain =$ 70,572
It would seem ( without looking at the Sched. D) that the 70,572 would
probably be taxed at the 25% level since the gain is less than the
depreciation.
And if the gain would have been greater than 144460 then the first 144460 is
taxed at 25% and that above 144460 at 15%.
Again thanks -- what I have learned is
1. sometimes online calculators give misleading information,
2. gleaning information on the Internet is chancy, and
3. I really need to get into the IRS forms and tough it out.
This looks like a good group.
JW