Rental-property investors face key tax issues at time of sale The million of small rental property investors across theNation face important tax issues when they eventually decide to Sell.

Q: I Bought my first rental property four years ago. It has gone. Up Nearly 50percent in value, and now I want to sell. How do I?Calculate my taxable profit?

Congratulations on your outstanding investment.now get Ready to share a hefty part of your good fortune with the Internal revenue service.To establish your taxable profit on the rental, you’re outstanding Investment. Now, get ready to share a hefty part of your good Fortune with the internal revenue service.To establish your taxable profit on the rental, you'll first have to Calculate its "tax basis" that's basically the price you paid for theProperty, plus the cost of any improvements (like a new roof or Driveway) you might have made, minus the cost if any Depreciation deductions you have taken through the years.

To illustrate, say you originally paid $100,000 for the property Four years ago, made another $20,000 in improvements but Have also claimed a total of $14,000 in the special depreciation Write offs that only landlords can take. Your tax basis would be$106,000($120,000 minus $14,000).If your net proceeds of the sale total $150,000,you’re taxable Gain would be $44,000($150,000 minus yours $106,000 Basis).

The profit attributable to the property's actual rise in Value would be taxed at 15 percent, but the part based on Depreciation would be taxed at a much higher 25 percent.Clear as mud huh? You obviously need to consult a certified Public accountant or other tax expert for more informationRather than paying taxes on the profit from the sale of your Rental property, the expert might suggest that you instead enter An Disapproved "1031 exchange " to defer your tax bill or Perhaps That you even move into the property for two years so you can Later keep up to $500,000(or $250,000 if you're single) of your Resale profit tax-free.