Author Topic: planning post-FIRE RE sales; long term cap gains taxes  (Read 1786 times)

psyclotr0n

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planning post-FIRE RE sales; long term cap gains taxes
« on: December 03, 2015, 12:58:19 PM »
Hello folks. Is AGI calculated on the net (passive?) income, or on total gross rent received?

Trying to figure out my long term cap gains tax at time of RE sale, (presuming I'll have no other income post FIRE, when I start renting out my place).

Otherwise I may sell before 3 years to qualify for the owner-occupied exemption of 2 of previous 5 years..
« Last Edit: December 03, 2015, 04:00:26 PM by psyclotr0n »

zephyr911

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Re: planning post-FIRE RE sales; long term cap gains taxes
« Reply #1 on: December 04, 2015, 08:49:57 AM »

Hello folks. Is AGI calculated on the net (passive?) income, or on total gross rent received?

Trying to figure out my long term cap gains tax at time of RE sale, (presuming I'll have no other income post FIRE, when I start renting out my place).

Otherwise I may sell before 3 years to qualify for the owner-occupied exemption of 2 of previous 5 years..
Simple answer, but because fishing and the proliferation of knowledge in fishing techniques are equally important, I always suggest going to the source:

https://www.irs.gov/pub/irs-pdf/f1040.pdf

You'll find rental income (or loss) on line 17 in the Income section, before the application of various adjustments to calculate AGI. And the value entered there is the net profit or loss from all relevant activities, based on your schedule E and/or other docs (LLC, etc).

psyclotr0n

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Re: planning post-FIRE RE sales; long term cap gains taxes
« Reply #2 on: December 04, 2015, 10:03:40 AM »
Thanks! As a matter of principle then, if our AGi is low enough post-FIRE then we won't need concern ourselves with LT cap gains rate when we sell since it'll be zero, it would seem

Vilgan

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Re: planning post-FIRE RE sales; long term cap gains taxes
« Reply #3 on: December 04, 2015, 01:33:47 PM »
Thanks! As a matter of principle then, if our AGi is low enough post-FIRE then we won't need concern ourselves with LT cap gains rate when we sell since it'll be zero, it would seem

LT cap gains are only 0 until you fill in the tax bracket, then everything beyond that will be the usual 15%

Vee2001

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Re: planning post-FIRE RE sales; long term cap gains taxes
« Reply #4 on: December 05, 2015, 09:39:55 PM »
Thanks! As a matter of principle then, if our AGi is low enough post-FIRE then we won't need concern ourselves with LT cap gains rate when we sell since it'll be zero, it would seem

LT cap gains are only 0 until you fill in the tax bracket, then everything beyond that will be the usual 15%

Also, people usually use depreciation on rental properties to help with their tax liability.  When you sell, unless you're doing a 1031-exchange or something else has happened, you will need to account (and pay) for the portion you previously depreciated.  I'll let someone go more in detail, so far I haven't sold any of my rentals but, when I do, I will need to figure this out in detail.

Bearded Man

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Re: planning post-FIRE RE sales; long term cap gains taxes
« Reply #5 on: December 08, 2015, 08:17:09 AM »
Thanks! As a matter of principle then, if our AGi is low enough post-FIRE then we won't need concern ourselves with LT cap gains rate when we sell since it'll be zero, it would seem

LT cap gains are only 0 until you fill in the tax bracket, then everything beyond that will be the usual 15%

Also, people usually use depreciation on rental properties to help with their tax liability.  When you sell, unless you're doing a 1031-exchange or something else has happened, you will need to account (and pay) for the portion you previously depreciated.  I'll let someone go more in detail, so far I haven't sold any of my rentals but, when I do, I will need to figure this out in detail.

This is something I dread. The tax nightmare for rental properties grows with every improvement as well. Tracking and depreciating gutters, roof, paint, appliances, etc. Then to top it off when you sell you have a tax nightmare, unless you 1031. Between transaction costs and taxes, it really sucks.

I have one rental that will soon be at the point where I will essentially make the exact same profit in a REIT for no work. At that point, I am considering selling it and just being done with it. Will see though...