Will my rental property sale trigger capital gains in my case?

[Jack B.]

I take it the answer is a yes  because the sale and purchase price difference.

I bought the house for 310K.

I can sell it for 400K.

I put 100K down when I bought it.

I recently cash out refinanced it.

After transaction costs of selling, I'll have 70K difference from sale price and purchase price. But that's my down payment, or part of it anyways. Will I still owe capital gains?

[Lamont Chen]

@Jack B.

Your down payment would be part of the 310k purchase price so you would be subject to the difference between 400k and 310k. If you think about it a different way... if you bought the place all cash 310k and sell for 400k you would be in the same situation.

However if you purchased the home as a primary residence, depending on the laws for your state you may be exempt from $X of gains. In NJ it is 250k for individuals so please check with an accountant for your state. If it is a rental property, you can sell and defer taxes using a 1031 exchange however the amount of taxes deferred will be greater because it will be sale price minus your adjusted cost basis (purchase price minus depreciation claimed on taxes).