Author Topic: two real estate-related questions pertaining to sale of rental  (Read 568 times)

kenmoremmm

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i'm closing on selling a rental property in the next few weeks. gross proceeds should be around $205k and i expect to pay about $37k in cap gains and depreciation recapture. two questions i'm seeking help on:
1. do i need to make an early payment to the IRS due to the large amount of tax to be paid 10 months from now?
2. for claiming depreciation on my taxes, would you include depreciation for the 2018 year? if so, would you use depreciation for a 12 month period or a 4 month period (the time my tenant was in the unit)? or, would you not include depreciation since you're basically paying it right back via depreciation recapture?

thanks

ISawTheLight

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Re: two real estate-related questions pertaining to sale of rental
« Reply #1 on: May 09, 2018, 07:41:26 AM »
1.  Generally speaking, as long as the rest of your 2018 tax payments (withholding, estimates) are at least equal to your 2017 tax liability you should be able to wait until next April to pay the taxes.  If your 2017 AGI is over $150k, then the current year payments will need to be 110% of the 2017 liability.  This is one of the safe harbor rules (and the easiest to plan around in my mind).
2.  You should take depreciation in 2018.  Rental property is on a mid-month convention, so you will take four or five months in the year of sale.

kenmoremmm

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Re: two real estate-related questions pertaining to sale of rental
« Reply #2 on: May 09, 2018, 10:39:28 AM »
is that AGI limit for single or jointly filing status?

ISawTheLight

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Re: two real estate-related questions pertaining to sale of rental
« Reply #3 on: May 09, 2018, 10:44:09 AM »
Both.  (It is $75k for married filing separate.)

kenmoremmm

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Re: two real estate-related questions pertaining to sale of rental
« Reply #4 on: May 09, 2018, 11:15:58 AM »
thanks

MDM

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Re: two real estate-related questions pertaining to sale of rental
« Reply #5 on: May 09, 2018, 11:49:49 AM »
1.  Generally speaking, as long as the rest of your 2018 tax payments (withholding, estimates)....
Withholding, yes.  But estimates don't count for the "safe harbors" unless they are four equal and timely quarterly payments.  See line 6 and line 12 and "Can You Use the Short Method?" in Form 2210.