Selling my rentals - Tax ramifications

[David Chance]

Hi,
I plan on getting out of rentals because it is becoming harder to be a landlord in Maryland.
I'll be selling them.. but was wondering if it is a bad idea with regard to taxes to sell all of them right away.
I understand that with a sell there are capital gains and depreciation recapture, but is there anything else that I should consider?

Not interested in doing a 1031 exchange.

With regards to taxes, what are the advantages / disadvantages of selling all of my rentals in 2025 versus one or two at a time per year.  (I have five rentals).

Thanks

[Natalie Bender]

A hidden expense that is impacted by capital gains is Medicare payments, if you are close to 65 or older consider the below:

The monthly amount you pay for Medicare Part B and D is based on your Modified Adjusted Gross Income (MAGI) from 2 years prior. MAGI includes capital gains recognized. 

 in 2024 For Medicare Part B (Medical Insurance):

• The maximum monthly premium for high-income beneficiaries is $594.00. This applies to individuals with annual incomes of $500,000 or more (or $750,000 or more for married couples filing jointly).

For Medicare Part D (Prescription Drug Coverage):

• The premium varies by plan, but high-income beneficiaries pay their plan's premium plus an additional $81.00 per month at the highest income level.

• The minimum monthly amount one will pay for Medicare in 2024 is $174.70. This is the standard premium for Medicare Part B (Medical Insurance) that most beneficiaries will pay.

Your adjusted gross income (AGI) directly affects the amount you must pay for Medicare premiums, particularly for Parts B and D. Here's how it works:

1. 1. Income calculation: Medicare uses your Modified Adjusted Gross Income (MAGI) from two years prior to determine your premiums. For example, 2024 premiums are based on your 2022 MAGI.
2. 2. Income thresholds: There are income thresholds that determine whether you pay standard or higher premiums. In 2024, individuals with MAGI of $103,000 or less (or $206,000 for married couples filing jointly) pay the standard premium.
3. 3. Income-Related Monthly Adjustment Amount (IRMAA): If your income exceeds these thresholds, you'll pay an additional amount called IRMAA on top of the standard premium.
4. 4. Progressive increases: As your income increases, so do your premiums. For 2024, the premiums are structured in tiers, with the highest tier being for individuals with MAGI over $500,000 (or $750,000 for married couples filing jointly).
5. 5. Affects both Part B and Part D: Higher income affects premiums for both Medicare Part B (outpatient care) and Part D (prescription drug coverage).
6. 6. Annual adjustments: These income thresholds and premium amounts are adjusted annually.

It's important to note that various types of income can affect your MAGI, including wages, Social Security benefits, pension payments, and even tax-exempt interest from municipal bonds. Additionally, one-time events like selling a home or making a large withdrawal from a retirement account can potentially increase your MAGI and affect your Medicare premiums two years later.