Tax Implications When Selling Rental Property in Texas

Considering a Sale of Investment Property?

There can be plenty of reasons for wanting to sell your rental property. If you do, you need to be aware of the tax implications when selling rental property. There’s a lot to know…so let’s get started.

The sale of investment property requires considering the tax implications of selling rental property.  Make sure before making the final decision to sell your rental property that this is what you want to do. Dealing with the tax matters can be complicated and expensive.

tax implications when selling rental property

Selling Rental Property Tax Rules

The first thing you are going to want to become familiar with is the tax implications of selling rental property. This is going to involve capital gains or capital losses. The tax implications involve this area of the tax laws.

Taxes on selling a rental property are going to include taxes at both the Federal and State level.

The difference between the sale price and the adjusted tax basis determines capital gains.

A rental property tax calculator can help determine this.

Capital gains can pertain to either short term or long term gains. This helps to determine what your selling rental property tax obligations will be.

Sometimes individuals purchase rental property and discover it’s not for them. Then they want to sell it within the year. This is considered short term so if sold at a profit then it would be taxed as short term capital gains. Usually this is taxed at the standard income tax rate.

Property held for longer than one year is subjected to a different tax rate. This is a long term capital gain. The rate can range between 0% to 20% but most often falls within the 15% range. Again you can use a selling rental property tax calculator, to help you estimate this.

Selling rental property tax expenses determines the basis of the rental property. This usually is the amount that you paid for the property.

Plus, additional expenses that you incurred to make the sale. If events occurred that decreased  value then you can likewise decrease the basis amount. At the same time if you improved the property then you can add the value of these improvements to the basis.

There are some advantages to an increased basis as it can help to reduce the amount of taxes you will need to pay. At the same time you can enjoy an increased tax deduction with a capital loss.

Possible Tax Deductions When Selling Rental Property

Pay close attention to rental property tax deductions when you are going to sell. You will still have your regular tax deductions for this property up until the time that you sell it.

It may be that when you are selling the property you are not going to realize a profit. This is going to put you into a capital loss situation.

You will be limited as to the amount you can deduct for this loss. You will be able to carry the loss forward for a specific number of years. Just as there are short term and long term capital gains the same applies for capital losses.

comfortable living room with sofas

Owning the property for less than one year constitutes a short term loss. Whereas longer than one year is a long term loss. You will need to look at the current years allowable deduction limit for the capital loss.

You may also be able to qualify for passive losses. These could be included with your selling rental property tax deductions.

These losses occur when your property losses in a given year exceed the rental income. There is a cap on as to how much you can claim each year, but these losses may be able to be carried forward. When you sell the property you can apply any of these unused losses that occurred during the sale year.

One advantage you may want to take advantage of is selling your investment property and buying another.

It would have to be in the same category as investment property.This applies to the 1031 tax rule. It can be complicated so you would want to rely on professional advice regarding this.

Some individuals sell their investment property so they can pay down their primary residence mortgage. This can create some substantial tax liabilities.

Tax Implications of Selling A Rental Property

Researching your tax obligations when selling your rental property involves becoming aware of the law. This includes knowing the tax consequences.

wood house with a green bike

Property depreciates and the IRS realizes this so they have rules in place. This pertains to how the calculations are handled for your depreciation deduction. Basically the rules are that depreciation applies over a 27.5 year period. So each year a portion of this can be used as a deduction against the profit you are making. It works out to  3.636% per year. Improvements have to be calculated into the depreciation formula.  Looking at rental property tax legalities when selling may mean other things to consider.

If you have been claiming depreciation you may be subjected to depreciation recapture tax.

Another area that includes potential tax consequences of selling a rental property is incurring the new Net Investment Income Tax. If this applies to you then you may have to pay an additional 3.8% on your net investment income. This is applicable to specific thresholds and deals with capital gains.

Being as this is not your principal residence you are not eligible for the capital gain exclusion. Which usually amounts to  $250,000/$500,000.

Selling Rental Property Taxes Summary

rental apartments

You must be familiar with the various tax laws during the sale of investment property. This is so you don’t make any mistakes when determining what your profit will be after taxes.

You will most probably want to use the services of an accountant to assist you with this. Although you can use the selling rental property tax calculator. This will give you a good idea as to what your selling rental property tax figures will be. If you are really familiar with the tax laws you can use tax accounting software to help you file your taxes pertaining to your rental property sale.

 

Ready to Sell?

If you’re interested in selling your rental property give Danny a call at 210-610-2511. We buy houses in San Antonio and pay cash so that you can sell your house fast. Give us a call!
 

43 Responses

  1. Hello there! This is my first visit to your blog! We are a collection of volunteers and starting a new project in a community in the same niche. Your blog provided us valuable information to work on. You have done a wonderful job!|

  2. Hi I am so happy I found your web site, I really found you by accident, while I was browsing on Yahoo for something else, Anyways I am here now and would just like to say kudos for a marvelous post and a all round enjoyable blog (I also love the theme/design), I don’t have time to read through it all at the moment but I have bookmarked it and also added your RSS feeds, so when I have time I will be back to read more, Please do keep up the superb job.|

  3. Woah! I’m really enjoying the template/theme of this website. It’s simple, yet effective. A lot of times it’s challenging to get that “perfect balance” between superb usability and appearance. I must say that you’ve done a superb job with this. Also, the blog loads extremely fast for me on Chrome. Exceptional Blog!|

  4. Hi there! I could have sworn I’ve been to this site before but after browsing through some of the post I realized it’s new to me. Anyways, I’m definitely glad I found it and I’ll be bookmarking and checking back frequently!|

  5. Today, I went to the beach with my children. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She put the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is totally off topic but I had to tell someone!

  6. One important thing is that if you find yourself searching for a student loan you may find that you’ll want a cosigner. There are many circumstances where this is correct because you could find that you do not use a past credit standing so the loan company will require that you’ve got someone cosign the borrowed funds for you. Interesting post.

  7. Our GTA 5 Butcher and Cheats online is entirely autonomous and anyone can have recourse to it. You do not necessary to waste your actual money anymore while buying the Essential GTA 5 Money or Notorious which you habituated to to acquire from ROCKSTAR Unflinching or from any third party and may numberless times you got scammed by these Spondulix and RP seller. http://www.googlep10.com

  8. Thank you, I’ve recently been looking for information about this topic for a while and yours is the greatest I’ve discovered so far. But, what concerning the conclusion? Are you certain about the source?|

  9. Howdy! Do you know if they make any plugins to protect against hackers? I’m kinda paranoid about losing everything I’ve worked hard on. Any tips?|

  10. You are so interesting! I do not suppose I’ve truly read something like that before. So nice to find someone with a few genuine thoughts on this subject. Seriously.. thanks for starting this up. This site is one thing that’s needed on the internet, someone with a little originality!|

  11. My spouse and I absolutely love your blog and find nearly all of your post’s to be exactly what I’m looking for. can you offer guest writers to write content for yourself? I wouldn’t mind creating a post or elaborating on a few of the subjects you write regarding here. Again, awesome website!

  12. Woah! I’m really digging the template/theme of this blog. It’s simple, yet effective. A lot of times it’s hard to get that “perfect balance” between user friendliness and appearance. I must say you have done a superb job with this. Additionally, the blog loads very fast for me on Safari. Exceptional Blog!

  13. Hmm is anyone else encountering problems with the pictures on this blog loading? I’m trying to find out if its a problem on my end or if it’s the blog. Any feed-back would be greatly appreciated.

  14. Hiya very cool web site!! Guy .. Excellent .. Amazing .. I will bookmark your site and take the feeds also…I am glad to find numerous helpful info right here within the publish, we’d like work out more techniques in this regard, thanks for sharing. . . . . .

  15. Do you mind if I quote a few of your articles as long as I provide credit and sources back to your website? My blog site is in the exact same area of interest as yours and my visitors would really benefit from a lot of the information you provide here. Please let me know if this alright with you. Many thanks!

  16. Hi, Neat post. There’s a problem with your website in web explorer, could test this… IE nonetheless is the marketplace chief and a big element of other folks will leave out your magnificent writing due to this problem.

  17. I wanted to put you the bit of observation so as to say thanks a lot yet again on the striking thoughts you’ve provided on this website. It’s quite seriously generous of you to make unhampered precisely what many people would’ve supplied for an e-book to get some dough for their own end, principally since you might well have done it in the event you decided. Those secrets likewise acted to become great way to fully grasp most people have similar keenness the same as my personal own to know the truth much more around this problem. I’m certain there are lots of more pleasant occasions in the future for people who discover your blog post.

  18. It’s remarkable to pay a quick visit this web page and reading
    the views of all mates concerning this article, while I am also zealous of getting know-how.
    asmr 0mniartist

  19. of course like your web site but you need to take a look at the spelling on several
    of your posts. A number of them are rife with spelling problems and I in finding it very troublesome to inform the reality on the other hand I’ll
    certainly come back again. 0mniartist asmr

  20. Thanks for the several tips contributed on this web site. I have seen that many insurance companies offer clients generous special discounts if they prefer to insure many cars together. A significant quantity of households own several motor vehicles these days, in particular those with old teenage children still living at home, plus the savings on policies might soon mount up. So it is a good idea to look for a good deal.

  21. Its like you read my mind! You seem to know a lot about this,
    like you wrote the book in it or something. I think that you could do with a few pics to drive the message home a bit, but
    instead of that, this is excellent blog. A great read.

    I will certainly be back. asmr 0mniartist

  22. I want to to thank you for this fantastic read!! I definitely loved every little bit of it.

    I have got you book-marked to look at new things
    you post…

  23. Saya telah telah berselancar online lebih dari tiga jam hari ini, namun saya tidak pernah menemukan artikel menarik
    seperti milik Anda. It is cukup berharga bagi saya. Secara pribadi , jika
    semua pemilik web dan blogger membuat konten yang baik seperti yang Anda lakukan,
    web akan menjadi lebih berguna dari sebelumnya.

    My website 123joker net

Leave a Reply

I found Danny to be a man of integrity and a man of his word. Dealing with him was a pleasure and he made everything simple and easy. His offer was straight forward and very fair. I would not hesitate to recommend him.

Larry Andrews, San Antonio, TX

Get a Cash Offer

We Look Forward to Speaking With You

Danny and Melissa Johnson

Danny and Melissa Johnson Owners and Operators of Danny Buys Houses

Call Danny Now 210-881-7707

5225 McCullough Ave, San Antonio, TX 78212