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Capital Gains and Losses - Taxes On Investment Property Sale (2019) - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
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(upbeat music)
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- [Toby Mathis] If you buy a property
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let's say $100000
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and you sell that
property after five years
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and it sells for $150000,
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will I be taxed on the $50000 of gain,
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or will I get my $100000 dollars back
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without paying taxes?
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Do you want to play with this one?
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- [Jeff Webb] Yeah, I mean lets
look at the easiest scenario
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that you bought $100000 worth of land.
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You're speculating on the price going up.
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- [Toby Mathis] Mmhmm
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- [Jeff Webb] Five years
later you're able to sell it
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for $150000, you're going to be taxed a
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capital gains rate since
it was an investment on
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the $50000.
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- [Toby Mathis] Mmhmm
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- [Jeff Webb] So we're talking
the long-term capital gains
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rates, which is either going
to be 0, 15 or 20 percent.
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- [Toby Mathis] Yeah
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- [Jeff Webb] Now let's
say that you're investment
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is a rental property,
anything you might be
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taking depreciation from.
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- [Toby Mathis] That's
the big one so you have it
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five years and you may be
depreciating this copy.
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- [Jeff Web] Then you're
going to have the $50000
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in capital gains but
you're also going to have
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some depreciation recapture.
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That is you're going to
have to recognize as income
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what you previously depreciated.
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- [Toby Mathis] Yeah so
in english, 'cus this gets
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really murky, if you buy
a rental property and
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you have a house on it,
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the IRS says, hey that
house is going to last
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27 and a half years.
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They're omnipotent, they
know how long it's going to
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last.
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So they let you take
127.5 against whatever
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income you're generating.
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- [Jeff Webb] Mmhmm
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- [Toby Mathis] And right it off.
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That's called depreciation
whether you make
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a dollar or not, you're
getting that depreciation.
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So it's whether you're,
how you're able to take it.
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In addition you have all that gain.
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So Jeff's absolutely spot on.
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The return on your capital,
what they call the faces
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you're going to get back tax free.
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Any depreciation, you're
going to pay whatever bracket
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you're at half to 25%,
so it could be a 10, 12
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it could be something
lower but it's going to be
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capped at 25% and then you're going to pay
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long-term capital gains
on the rest, the 50
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and that's going to be at
either zero or 15 or 20%
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plus your state taxes.
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- [Jeff Webb] Right
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- [Toby Mathis] Plus if
you make too much money
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then that investment
income tax is another 3.8
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if you make over a quarter mil I think.
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Is that right?
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- [Jeff Webb] Yeah yeah that is right
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- [Toby Mathis] We throw
this stuff out there.
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We just sit here and
banter back and forth.
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He's looking at me like what the hell
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are you talking about?
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- [Jeff Webb] Well I thought
you were going to say
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the account sometimes gets murky.
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- [Toby Mathis] Yeah no (muffled response)
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Somebody asked on that previous question,
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by the way, what if you
have an LLC an not a
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C-corp?
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An LLC does not exist to the IRS.
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So the easiest way to think of an LLC
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is it's a wrapper.
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The IRS says I don't care what the wrapper
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is, what is inside and you tell it,
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it's a partnership, it's a corporation,
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it's an S-Corp, it's a C-Corp.
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So an LLC just means
that the IRS needs to be
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told what it is.
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- [Jeff Webb] Yeah and one
thing on the C Corporations
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while they do recognize
capital gains and losses
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there are no special rates
for capital gains and
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losses.
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- [Toby Mathis] Yup
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Somebody else asked about
that same previous question
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Do they know where they
should be an LLC or Inc?
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You're asking the same thing.
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I would make it a C-Corp
just to be safe because
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now we're not worried any full through.
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And yeah if you have
an LLC it's disregarded
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and you own it, then it's
a sole proprietorship.
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We'll keep jumping on these ones.
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Oh and somebody just
said hey on this question
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this last question they had, there was a
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10:31 exchange.
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So you wouldn't pay any taxes with a
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10:31 exchange as long
as you meet the 10:31
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exchange rules you roll forward the bases,
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which is you're not going to pay any tax
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on the depreciation or
on the capital gains.
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You just roll that forward
into the next property.
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That's kind of an interesting mix.
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You don't have to worry about it.
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Just make sure you do your 10:31 exchange.
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Alright.
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