Partial 1031 Exchange

Financial Advisor · Woodland Park, CO · Member since 2018 · 53 posts · 40 votes

I’m selling a property right now for a long-term capital gain of ~$55,000. Am I correct in understanding that my 2019 long-term capital gains will be 0% up to $39,375 and my standard deduction (single) of $12,200 means that (assuming no other taxable income) I pay zero taxes up to $51,575 in LTCGs? I’m planning to use a 1031 exchange for all but $10,000 of the sales proceeds, which I would like to have available as discretionary cash immediately after closing. Will I pay any taxes on that $10,000 at all in this scenario: federal/state/local, and/or depreciation recapture taxes?

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
6y
Originally posted by @Ryan Haley:
I’m selling a property right now for a long-term capital gain of ~$55,000. Am I correct in understanding that my 2019 long-term capital gains will be 0% up to $39,375 and my standard deduction (single) of $12,200 means that (assuming no other taxable income) I pay zero taxes up to $51,575 in LTCGs? I’m planning to use a 1031 exchange for all but $10,000 of the sales proceeds, which I would like to have available as discretionary cash immediately after closing. Will I pay any taxes on that $10,000 at all in this scenario: federal/state/local, and/or depreciation recapture taxes?

Does 55k include selling costs? Asking because if selling cost is not factored in yet, you might not even need 1031 exchange because there will be an only dep recapture tax.
And you don't add SD to the CAP gain limit to get exclusion amount. The CAP gain is calculated on the lesser of taxable income vs the limits (55k-12k =43 vs 39k) on the 0% bracket. So, you will have around $600 cap gain on everything above 39k up to 43k. These are approx cal.
Let's say you had 20k of depreciation, you would pay extra around 800 (taxed at your ordinary-income max up to 25%).
The total tax would end up being around $1,500.
If you do 1031, you would end up paying a similar amount, so no tax savings.

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Ryan Haley
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Financial Advisor · Woodland Park, CO · Member since 2018 · 53 posts · 40 votes
6y
@Ashish Acharya Thanks. The $55k is net, after selling fees.
Is the cap gains tax progressive? That is, if I have a $55k cap gain, is the first $39k taxed at 0%, and only the remaining $16k taxed at 15%?
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