💰The sales price of a rental property is straightforward, but determining the cost basis can be tricky.
🏡The cost basis includes the purchase price of the property, closing costs, and any improvements made.
📋Depreciation claimed on the property must be subtracted from the cost basis.
🔢Depreciation recapture is taxed at a higher rate than long-term capital gains.
💼It's important to consider accumulated depreciation when estimating tax liability.
What is the cost basis?
—The cost basis of a rental property includes the purchase price, closing costs, and improvements made.
What is depreciation recapture?
—Depreciation recapture is when the depreciation claimed on a property is taxed at a higher rate upon sale.
How do I calculate gain?
—Gain is calculated by subtracting the cost basis from the sales price of a rental property.
What is the tax rate for depreciation recapture?
—Depreciation recapture is taxed at a rate of 25%, while long-term capital gains are taxed at 15%.
Why is accumulated depreciation important?
—Accumulated depreciation must be taken into consideration when estimating tax liability for the sale of a rental property.
00:00Intro to calculating gain and cost basis for the sale of a rental property.
04:20Explanation of the cost basis, including purchase price, closing costs, and improvements made.
07:31Importance of considering accumulated depreciation and subtracting it from the cost basis.
11:46Explanation of depreciation recapture and how it is taxed at a higher rate than long-term capital gains.
13:01Overview of a gain example and the tax rates for depreciation recapture and long-term capital gains.
