Hello tax people, I'm considering selling several rental properties and don't want to go all in uneducated and wondering if my calculation is on track.
I have a rental I bought in 2016 for $200K. I made no improvements so for CGT my cost basis is $200K. For CGT, selling it at $365K, minus $200K cost basis, minus commission (say $15K for ease of calc), $150K net proceeds. CGT calculated at 15% and comes to $22,500 owed to the IRS. Good so far?
Depreciation recapture, regardless of whether I claimed it all or not, would be 200/27.5 = $7272, multiply by 10 years of ownership, to be $72K. Subtract from cost basis and get $128K, subtract from net sale price of $350K and get a total profit of $222K which is considered ordinary income. Then I pay 25% of that and get $55K owed to the IRS.
Total owed to the IRS would be $77,500 in this example if correct...seems like a lot of money I would owe the IRS. Is this correct or am I dumb as a brick?
I appreciate any thoughts on this. Just speculating for now.