Depreciation On Taxes
I have 3 rentals that I use the depreciation on my taxes. My question is if I don't do a 1031 exchange when I sell them how is the depreciation and capital gains factored in at the end?I know newbie question 
I have 3 rentals that I use the depreciation on my taxes. My question is if I don't do a 1031 exchange when I sell them how is the depreciation and capital gains factored in at the end?I know newbie question
The complete answer depends on what state you are in. I'm in California, so here is the answer from my perspective.
First, your depreciation will be added back into your income or "recaptured". Depreciation recapture is taxed at 25% for federal purposes.
Second, the maximum Federal Capital Gain tax rate is 15% at this point in time.
Third, California does not have a capital gain tax rate, so the maximum ordinary income rate would be 9.3% at this point.
Also, in California, if you are an individual and sell investment property with out doing a 1031 exchange there is a mandatory 3 and 1/3 percent withholding requirement at the close of escrow. This is based on the GROSS Sales Price.
A 1031 Exchange will defer or avoid all of these tax items.
You can roughly figure 25% of your gain and depreciation. Check with local tax advisors.
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