Capital Gains Tax on Investment Property?

[drea10]

I just sold a 2 family that I have owned for 13 years for a nice profit.
I have never lived in the property, How does the Capital Gains tax work?
What if I re invest the money into another rental property? Can I avoid the tax if I re invest? Any information would be greatly appreciated! THANKS

[RWR]

If you sold the property using a 1031 exchange you would own no tax. if you reinvest into rental property. There are a lot of rules you need to meet in order for this to work for you.

Contact the IRS before you sell the next time and ask for their booklet on 1031 sales on income property. It's FREE.

[Charles G]

The way you figure it

Take the cost bases. That is what you originally paid for it, plus the cost of all IMPROVEMENTS you may have done since you owned it.

You have to subtract out all the depreciation you took, or were entitled to take, since this was used as rental property.

Take the money you received from the sales, add the depreciation, subtract the cost basis, and you get your profit. Take 15% of that profit, and pay that as an estimated tax payment. http://www.irs.gov/pub/irs-pdf/f1040es.pdf

You only need to be approximately correct for the estimated payment; when you or your tax preparer does the tax at the end of the year, the final fine tuning can be done.

[imami800]

Yes,
I agree with you. Now a days real estate investment is the best option then any other kind of investment. I would like to tell you that when my friend had invested in real estate he was also not sure of the profits there but he recently had his real estate deals from IRA-401K
and he was quite pleased with his investing. There are many things that you can look up in investing in real estate and I think that it will be profitable for you too.
Good Luck!!!!!!!