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I live and work overseas. So after the foreign exclusion is added to my tax return I pay no Fed taxes.
I also own a rental home in San Francisco and several rentals in the Phx area.
However, I pay no taxes on the rental income due to losses rolled over from previous years.
I am planning to sell the SF rental property later this year and was thinking about doing a 1031. The SF house was bought in 1996 and it is worth a lot more today. Maybe buy two or three rentals in the Phx area.
Then I read the below link and thought perhaps I don't have to pay the 15% Fed capital gains tax given my net income is zero. With regards to Cal. taxes my net income will be zero as well.
If you are in the zero capital gains bracket you could pay zero federal. However to be in the zero percent bracket that income level has to include the gains and recaptured depreciation as well. States do not recognize the zero percent bracket
If you are in the zero capital gains bracket you could pay zero federal. However to be in the zero percent bracket that income level has to include the gains and recaptured depreciation as well. States do not recognize the zero percent bracket
O.k. I sell the house and have 1.5 million profit.
So conceivable I could pay zero in Fed taxes but get hit very hard in Cal esp. when the recaptured depreciation (180,000) is tossed back in.
I have not looked at the brackets yet but in 2017 the zero percent bracket was the 15% bracket.
Including the gain and all taxable income you cannot exceed the top of the 15% bracket. Anything overflowing starts being taxed at 25% and up. So pretty much i think you were capped in total to about a total taxable incoome in the 70k range after deductions.
Keep in mind , large capital gains trigger a 20% capital gaon tax and a 3.80 medicare aca surcharge . There is a good chance all other income will be hit by the amt as well.
So taxes can run a lot even with special capital gain rates
Where did you get the idea a million dollar profit is in the zero capital gains bracket?
The original plan was complete a 1031 exchange and spend $750,000 of the 1.5 million to buy three rentals in Phx which will keep the cash flow coming in.
Then I saw the link about a way to avoid capital gains tax.
I have not looked at the brackets yet but in 2017 the zero percent bracket was the 15% bracket.
Including the gain and all taxable income you cannot exceed the top of the 15% bracket. Anything overflowing starts being taxed at 25% and up. So pretty much i think you were capped in total to about a total taxable incoome in the 70k range after deductions.
Keep in mind , large capital gains trigger a 20% capital gaon tax and a 3.80 medicare aca surcharge . There is a good chance all other income will be hit by the amt as well.
So taxes can run a lot even with special capital gain rates
Where did you get the idea a million dollar profit is in the zero capital gains bracket?
yeah , the special capital gains rate can actually become a lot higher than one thinks because of all the surcharges and the amt tax .
we had sold an asset prior to retiring in 2014 .
we waited one year longer to sell and the capital gains rate jumped from 15% to 24% at that level . that sucked and is one reason 1031 exchanges and also kicking the can down the road tax loss harvesting can get you in the end even worse .
.
looking at our taxes for the year we sold the lease rights , i show total income including the gain on the lease rights was 461,136.00
bottom line federal taxes were 89,387 , new york state taxes 28,604 and nyc taxes 15,021.00
133,000 in taxes . i think that is 29% plus more in amt the following year .
there was an additional amt penalty due again the following year , even though our incomes were nothing special because the large state and local taxes tripped it again on deductions this time . so that is part of the taxes too .
Regardless if you do a 1031 exchange you’re correct there is no capital gains tax as long as whatever you are selling at is reinvested into other real estate assets. This is what we do all of the time. If you sold a building for $100M and you bought two buildings for $50M each, you aren’t taking a gain. There is no capital gain.
Regardless if you do a 1031 exchange you’re correct there is no capital gains tax as long as whatever you are selling at is reinvested into other real estate assets. This is what we do all of the time. If you sold a building for $100M and you bought two buildings for $50M each, you aren’t taking a gain. There is no capital gain.
That's not correct. The gain is only deferred if you do a 1031 exchange (or if there was an involuntary conversion).
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