Selling a Rental Property

[Maria Saenz]

I have a property that I turned into a rental 4 years ago. This property has increased in value $90,000 from the original selling price. What are the tax implications if I decide to sell the property without reinvesting in another property using the 1031 exchange? Thank you.

[Dave Foster]

@Maria Saenz The difference is do you immediately incur a federal capital gain tax of around $13K plus depreciation recapture.  Or do you do the 1031 and use that $13K+ to buy more investment real estate.

If you're not going to buy more property then it's a moot point.  If you're going to use the proceeds to buy more investment real estate then looking into a 1031 is a must.

The only downside to the 1031 where you live is that PA does not recognize it so you will still pay state tax even if you 1031 and defer federal tax and depreciation recapture.