How much tax is paid on selling rental property?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
How much tax is paid on selling rental property?
I was gifted a rental property from my mother who inherited it. When I sell it, how is
tax figured out on selling price?
Asked on October 22, 2017 under Real Estate Law, New Jersey
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
For the long answer, you need an accountant: taxes are complicated. For the short answer, when you were gifted the property, you acquired a tax "basis" in it: an effective tax value, more or less equal to what it was worth when gifted to you. (That's one of the things you may need accountant help for: fixing that value, which will be based essentially on real estate comparables in that area.) When you sell it, compare the sale price to the basis: the difference is the profit, and hence what you pay taxes on.
But there are other wrinkles: investments made in the property (renovations, for example) may increase the basis, thereby reducing the taxes you pay on sale. As RE, when you sell it, it's likely taxed at the capital gains rate. Etc. You really need to work with true accountant (e.g. a CPA), not just a tax preparer on this.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.