Tax Q's: Selling Rental Property at 50K loss

[Brian Morissey]

Hi,

I am considering selling my rental property which I purchased for $380k 11 years ago and currently has a market value of $330k. I am not breaking even on the rent, hence rather sell. I am married with combined yearly income of $150k+ . I have 3 questions:

1) How will a 50k loss affect my taxes if my combined income is 155k? Is it favorable or not favorable? I heard some deductions are phased out after $150k.

2) Should we hold on to the rental property that's under water (Sacramento, CA), or sell it at a loss and buy another one in another city where housing prices/rent is appreciating faster (San Jose, CA) with much higher rents? Which one is more favorable in terms of taxes?

3) Since I am selling at a loss, do I have to worry about depreciation recapture? I've used Turbotax over the years and if I model the sale of the property in Turbotax Premier, it does not show I have to pay taxes (assuming my income stays the same). In fact, Turbotax shows that I will get both a federal and state tax refund.

Thanks in advance!

Brian