Selling your rental property triggers a couple of different types of taxes - depreciation recapture and capital gains tax.
Capital gains taxes are lower than ordinary taxes, and there generally 15% or 20% depending on your ordinary income tax bracket. More information click here <<CAP GAINS RATES>>
First step is to calculate your basis in your property. For example if you bought your property for $100,000 and have depreciated $25,000, your basis would be $75,000, then for example you sell the property for $150,000
In this simple example, here are the tax components
$150,000 Sales Price
$100,000 Gross Profit
The tax implications are that of the $100,000 in profit.
The profit is then broken into components.
$25,000 has been written off through depreciation, this is 1250 gains and are taxed at 25%, ($6,250)
The remaining profit of $75,000 is treated as long term capital gains. And depending on your situation, that could be taxed at 15% ($11,250)
Thus your total tax on this transaction would be 11,250 + 6,250 = $17,500
Doug Zandstra CPA CFE EA
Certified Public Accountant
Certified Fraud Examiner
29 Pearl St NW, Ste 225
Grand Rapids, MI 49503616 970 3000