What taxes are imposed on a person when they sell an investment property?
A taxpayer who chooses not to complete a Section 1031 exchange may be subject to numerous federal, state and local taxes. If the property being sold is held less than one year, the gain on the sale of the property is taxed federally at ordinary income tax rates, and although constantly changing, may potentially fall in the high thirty percentile. If the property is held more than one year, the gain on the sale of the property is taxed at the federal capital gains rate, currently at fifteen percent. If the property being sold was a depreciable property, the portion of the gain resulting from the depreciation deduction is federally taxed at a twenty-five percent rate or at ordinary income tax rates, depending on the asset. In many instances, the sale of a property may affect the calculation of Alternate Minimum Taxes (AMT) for a taxpayer. These “tax preference” items are generally taxed by the federal government at a rate of twenty-six to twenty-eight percent. Let’s also not forget our S
