In a nutshell, here is what you could expect to pay in taxes on the sale of an investment property. Please keep in mind that taxes could be delayed if a seller elected an 1031 tax-deferred exchange. Also, I am not a tax advisor nor claim to be one so please be sure to consult your tax advisor or CPA as each taxpayer's circumstances could be different.
Investment Property Held <1 Year
- Interest is deducted as a business expense
- Ordinary income tax is paid:
- 28% Federal
- 9% State
- Self Employment Tax of 13% is paid for those who are "dealers", that is buying and selling on an on-going regular basis - somewhat vague in tax code.
- Total taxation is 50%
Investment Property Held >1 Year
- Interest is deducted as a business expense
- Capital gains tax is paid:
- 15% Federal
- 9% State
- No Self-Employment Tax imposed
- 25% depreciation recapture
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