Selling a rental property can be complicated. Find out how to potentially eliminate some of the tax burdens.
While owning rental real estate is a long-term investment, there may come a time when you want to sell. Perhaps your retirement plans are to get out of the landlord business altogether. Or maybe you’ve found a better investment opportunity that’ll provide higher annual gains than your current rental property is providing. Regardless of reason or timing, it’s important to take under consideration the tax on sale of property and plan an exit strategy and lessen the tax hit on the sale.
Depending on where you live and where the property is located, you will either pay capital gains or state income tax on your gains from the sale. Additionally, accumulated depreciation is recaptured and taxed at a federal rate of 25%.