strategy for selling 2 real estate properties

[TheBeeKeeper]

I have 2 rentals, and we would like to get out of the landlording business. We're thinking of selling when tenants want to move out.
One rental was purchased in 2013 for 200K, worth today about 300K.
Other rental was purchased in 2015 for 180$ and worth 250K.

From a tax point of view would we be saving much by not selling both properties in the same year?

TIA!

[terran]

These would be long term capital gains, so it depends on your total income from all sources. Since you say "we" I assume you file married filing jointly? In that case, if you have taxable income (including these gains) between $80,000 and $496,600 you'll pay 15%. You can see all 2020 tax brackets (including capital gains rates) here: https://taxfoundation.org/2020-tax-brackets/. There's also the Net Investment Income Tax which will add an additional 3.8% tax if your MAGI (for NIIT purposes) is over $250k.

Any of the capital gain that stays under $80k total taxable in income will save 15% (15%-0%), any under $496k will save 5% (20%-15%), any under $250k NIIT MAGI will save 3.8%.

Also remember that you'll need to recapture any depreciation you were eligible for while these properties were rentals and that will reduce your basis (increase the gain).

[TheBeeKeeper]

This is very helpful. Thanks!

[LightStache]

If you're getting out of the business because you don't like being a landlord, but you still like real estate as an investment class, you should consider a Delaware Statutory Trust. Read more at https://www.realized1031.com/blog/rolling-from-property-to-reit. I'm not sure a DST would be cost effective given the amount of equity vs. fees.

Definitely do some projections to see if you save by selling over two years or if you need to do some planning to reduce taxable income in a particular year to avoid higher taxation. Hard to be more specific without knowing other sources of income and amounts.

[MustacheAndaHalf]

Just to merge all of the IRS breakpoints together (which is the same as terran's post):

First you add up all income and short-term gains, and stack the long-term gains on top:
$0 - $80k long-term gains, 0%
$80k - $250k long term gains, 15%
$250k - $496k long term gains, 15% + 3.8% = 18.8% effectively
over $496k long term gains, 23.8% effectively

The NIIT (net investment income tax, aka "Obamacare tax") is applied in a different place than taxes on long-term gains, but when you're done filling everything out, you get the numbers mentioned above.