Creative Commons License photo credit: kozumel

If you’re thinking about selling one of your rental properties, whether you want out of the business or you’re just looking to unload a rental, you’re going to have to take a realistic look at what taxes you’ll have to pay before you decide on a price or go through with the sale.

Your rental property is considered an investment by Uncle Sam. Basically there are two types of investments, long term and short term. Short term investments are ones that you’ve held for less than a year. Most likely your rental property doesn’t fit into this category and is then considered a long term investment.

With a long term investment you’ll have to pay capital gains taxes on any profit you make from the sale. The maximum tax on that investment will be 15 percent, but you can do a lot of things to defray this expense if you’ve kept careful records throughout the years. You can subtract your cost of sale and any expenses you’ve had over the years related to upkeep and maintenance.

If you’ve been depreciating the property over the years you’ll have more to pay when it comes to taxes because in essence you’ve declared your property less valuable and so more of the purchase price will count towards your profit.