Sale Of Rentals
hi, new to this please bear with me. we are thinking of selling two single family homes on one lot. they have been rented for over twenty years and they are to far away to handle anymore. we bought cheap and improved with one new home ( twenty years ago) how do we figure the gains we will have to pay? for example we paid apx 29k for the lot with one house and then we built another house and lived in it for awhile. cost on that was apx 20k. we have been claiming consistent rents and depreations since then. where would we stand to do an outright sale? thanks 
Your CPA, assuming he/she has been tracking your depreciation schedule is a prime resource...also your cumulative records from acquisition to any improvements you have not expensed already...sounds like given the time period and original cost basis, you have little left...good news is any capital gain is only 15% to IRS, unless you're a CA resident, in which case you'll have another capital gain tax to your Governor Davis...believe it tops out at 9%...CPA will rule.
Hello Russk1,
It sounds to me that you will make a nice profit. Give to Uncle Sam his due and be happy with the rest. A 1031 exchange will only work if you are planning on purchasing more rental property. If you are not planning on getting back into the rental business, I would just buy myself a little something to make myself feel real good. After all that is why we do what we do. No time like the persent to feel good.
Quote:where would we stand to do an outright sale?russk1,
For the sake of this discussion, let's say that the original value of the land when you purchased the property was 9K. This means that the original value of the house you built was 20K. You then built another house on the same land for 20K, making your total investment cost $49K (9K for land, 40K for improvements).
Since you have owned and operated these houses as rental properties for more than twenty years, let's also assume that you have fully depreciated the houses. Your "book value" for the property is now 9K (the original value of the land).
When you sell, all your net sale proceeds over 9K and up to 49K will be taxed at 25% (this is the depreciation recapture), while everything over 49K will be taxed at 15% (5% if your tax bracket is lower than 25%).
For example, let's say you net 100K from the sale of your property. The tax on your 100K sale will breakdown as follows:$9K x 0% = $0
$40K x 25% = $10K
$51K x 15% = $7.65KSo, in this example, your total tax on your 100K sale will be $17,650