Seeking help calculating capital gains tax owed

[Jim Hwang]

Hello all, I'm trying to figure out the opportunity cost of doing a 1031 vs. Taking the tax hit in order to have more liquid capital to invest. I'm getting a wide range of estimates as a novice and would really appreciate anyone's help. The rental property was purchased for 325K and sold for 500K. It was jointly owned and so my gross gain is 250K. I netted 115K after mortgage payoff, commissions, and closing costs. I'm married filing jointly and have only 20K of taxable W2 income due to having a foreign income exemption and wife being a homemaker. Importantly, I rented it out the past 15 years, so the depreciation recapture is the real monkey on my back. Minimal other cap expenditures, as it was a new A class property when purchased. I would be happy to give any other info you need. I'm new to BP and I can't believe how much people here want to help. Thanks!

[Dave Foster]

@Jim Hwang, whether or not you claimed depreciation the IRS requires you to recapture what you could have taken - probably at 25%. That could easily be $40K in tax right there.  So if you don't complete your 1031 you'll want to amend your tax returns to at least take advantage of the depreciation benefit before you have to pay it back.

If your gross gain is $250  then that is probably taxed at 15% federal plus whatever state.    There are many 1031 sites like ours where you can access calculators to verify what you think.  We've even got a free consult on our site called "hand grenade math" where one of my specialists will walk you through the possible tax.  

This way you can make a better decision on whether to continue with the 1031 you have going.  Or to let it die.