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Will my Mom have to pay income taxes if we buy her portion of our house?

September 13, 2006


From:  Anonymous
Date:  Thu, 13 Jul 2006

How do I figure more or less what I will be taxed on if I sell my rental property located in San Jose, California.

Answer

Date:  09 Aug 2006

Hello,

Subtract from the sale proceeds the tax basis of the property and selling expenses, add the accumulated depreciation. This is the gain from the sale. The amount of the gain up to the accumulated depreciation may be federal taxable at 25%. Any additional gain may be federal taxable at 15%. California will tax the entire gain at 9.3%.

There may be some adjustments for these figures based on your other taxable income.

I recommend that you have a tax advisor help you with this exercise, because the facts of your individual situation are important.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

How do I figure my tax if I sell my rental property?

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