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George P.
  • Real Estate Investor
  • Baltimore, MD
268
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1,493
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Help me understand ... primary converted to rental, sale

George P.
  • Real Estate Investor
  • Baltimore, MD
Posted

Originally purchased as Primary residence for 160k; lived in it for 7 years w/o making any improvements.

2011 - property converted to rental property. FMV at the time is 210k.

2017 - sale of rental for 220k. Cost of sale appx 20k (incl first time home buyer subsidy at closing).

Depreciation taken during this time appx 27k (per accountant's calculations at that time, tax basis used 160k * 80% / 27.5 years).

I want to make sure my calculations below are correct....

Adjusted cost basis = 160k-27k=133k

1) LT tax gain = 220k - 20k cost to sell - 160k = 40k --> taxed at 15% --> 6k

2) depreciation recapture 27k @ 25% = 6.75k

Rental Property Tax Bill Due in 2018 = 12.75k (6k + 6.75k)

Thank you in advance.

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