When my husband died, I had enough life insurance to pay off our home. I soon realized that it was too much for me and started renting it out. I purchased a smaller home for myself.
Now I am planning on selling the rental after renting it out for four years. I just learned that I might have to pay capital gains if I sell it. Is there a place I can go to learn more about this works so that I can decide whether I should continue renting? I bought the house for 175,500 and should be able to sell for 225,000. It is currently renting for 1,400 a month.
I believe that this is totally up to your goals. The fact you have a rental that is paid off is great. Are you looking to continue working with rentals or are you trying to step away from the landlord lifestyle? The rental would have capital gains tax on the growth from what I know about the industry.
Personally I would hold the rental since it creates a lot of potential tax savings for you and if you are making good monthly income from it, no reason to sell unless you just don't want the hassle of being a landlord.
Hope this helps
I was going to sell it to pay off my mortgage. Then I was going to take the extra money to help purchase another rental.
Now that I learned about capital gains I am having second thoughts as to whether it is a wise decision. My biggest concern is that it was built on a concrete slab. I don't want to risk Jack hammering for water leaks in the future.
I own a rental outright that's worth $180. I purchased it last year for $75k. I thought I would owe like $20k in capital gains bit I spoke to a CPA and was surprised it was only gonna be like $8k. I'm in the same boat as you right now.. sell or keep... I'm pretty sure I'm gonna sell and move on from being a landlord. Pay off some debt and my cars and put the rest in something that pays interest.
You should have received at least a partial step up in basis of the property depending on whose name was on the title upon passing.
There is a couple of information that is required to calculate what the actual capital gains tax would be upon sale.
Adjusted basis of property when it was converted to a rental.(this should agree to the basis reported on the tax return if calculated correctly)
Federal capital gains tax rate is either 0%, 15%, 20% or 23.8%(factoring in Net investment income tax).
North Carolina State Income tax is flat at 5.75%