The cost of selling rental real estate, as with any income deriving transaction, will have some tax consequences as well. It’s important to work with a tax accountant in Santa Rosa to learn more about the sale process and how it will impact your taxes at the end of the year. Our team at Montgomery Taylor Family of Companies has experience in this area of the industry and, in this latest post, our tax accountant in Santa Rosa highlights the ramifications of selling rental real estate.
Net Gain or Loss?
The tax law requires that you net your gains and losses from the rental property over the last year. You must do this for any property owned for longer than a year. If the result is a net gain, the resulting income will be taxed as a capital gain. However, in some cases, the prior depreciation of the value of the property and the losses may mean that you face less favorable treatment at tax time. If you experience a loss, you may deduct it in full against your ordinary income. It’s important to speak with a tax accountant in Santa Rosa before making this final decision.
Benefit from Passive Loss Rules
One of the major factors limiting rental property owners from benefiting from their real estate holdings is the passive loss legislation. Under this law, you might not be able to deduct losses from holdings due to not directly living within the property, and only obtaining passive income from rentals. However, in the year that you sell the property, you are allowed to take into account deductions from past years that were suspended under the law. These losses can now be a tax-deductible value, which can help you reduce your tax burden by thousands of dollars.
Contact Us Today
It’s important to work with a qualified tax accountant in Santa Rosa before reviewing your tax exposure and your real estate value this year. Call our team today for a consultation.