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Updated almost 5 years ago on .
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Capital Gains Tax and HELOC
I am looking to sell a rental property and have a mortgage and a HELOC (Home Equity Line of Credit) against it currently. If I were to sell is the profit (taxable amount) considered the sale price minus mortgage + HELOC (profit = sales price - (mortgage + HELOC)) or just the sale price minus mortgage (profit = sale price - mortgage)? In other words would I have to pay capital gains tax on the amount that I use to pay off the HELOC in addition to the amount above and beyond the mortgage? Also would I have to pay taxes on the depreciation I took against it?
Thank you for any advice you can offer.
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- Tax Strategist| National Tax Educator| Accepting New Clients
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Cash at Closing is not Equal to taxable income.
In this case your gain is going to be much higher than how much cash you get- since essentially you accessed that cash early via a mortgage and heloc.
Sale price - selling costs- purchase price - improvements - depr = Taxable gain
Portion attributed to depreciation is at ordinary tax rate not CG up to 25%
