I sold a rental I had for 25 years. I sold it last week. I have a capital gain of 150k. How do I pay taxes on this? Do I just deposit as estimated taxes. Is there a deadline to deposit the tax or I can hold on to tax thru end of year?
ASSUMING that you don't have any big losses to offset the gain ...
THEN you need to pay estimated tax to the amount of 90% of this
year's tax due. (If your total tax was greater than zero last year --
I mean the "total tax" line on your return, before subtracting
withholding and estimated tax -- then you can deposit 90% of this
year's tax or 100% of last year's tax, whichever is lower.)
If your total tax was zero for last year, then you may not owe any
estimated taxes regardless of this year's income. This page is pretty
good, and not very hard to understand:
employed/estimated-taxes Don't worry about the fact that it says "small business" -- the rules are exactly the same for any individual taxpayer.
Typically you pay estimated tax in four quarterly installments, on
the 15th of April, June, September, and January.(*) But when you have
irregular income in the middle of the year, you can deposit the tax
in the appropriate quarter -- the middle of September, in your case.
On the IRS Web site, you want to get form 1040-ES and form 2210. You
compute your estimated tax on 1040-ES. (This is not a schedule for
form 1040, but a completely separate form, 1040-ES.) However, you
also need to fill out 2210 and send it with your 2019 return next
April, to show why you did not need to make your first two payments
in April and June, and therefore why you are not subject to a penalty
Oh yes, there's one more sort-of loophole. Withheld taxes count as
paid evenly throughout the year, regardless of when they were
actually paid. If you're employed, you could have your HR department
withhold extra money every paycheck, so that by the end of the year
it will amount to at least 90% of this year's total tax or 100% of
last year's. If you do that, you won't need form 2210.
If you're not 100% sure how to compute your estimated tax, you may
want to consult a qualified professional.
And finally -- check your state's rules. If your state imposes an
income tax, you'll almost certainly have to pay estimated taxes to
your state also.
(*) It used to be April, July, October, and January -- you know,
quarterly. But on the principle that cutting a piece of rope and
attaching the cut piece to the other end makes it longer, a couple of
decades ago Congress moved the two middle payment dates a month
earlier, even tough each is still 1/4 of the total.)
In article ,
Publication 505 is all about estimated tax, and form 2210 is where you
compute the penalty if you don't pay it on time.
Roughly speaking, recompute what your tax will be with the 150K gain, and make
an estimated tax payment in September that will bring your withheld and estimated
tax up to 3/4 of the new total for the year, and pay the last quarter estimate
There are a zillion details and exceptions and you usually (but not
always) only have to pay 90% of your total tax as estimates to avoid
form 2210 penalties, so I would encourage you to look at these two
Unfortunately, only Stan Brown's reply (the first in the thread) was thorough and on point. There are a few issues which still merit further consideration.
Starting from the top, you probably don't have $150K in capital gains. Since this was a rental property some of the gain is likely depreciation recapture which will be taxed at ordinary tax rates. Only the remainder will get the favorable capital gain tax rate.
If you need to make an estimated payment, that payment would be due by September 16 (September 15 is a Sunday this year). However, you may not need to prepay (all of) your tax liability. The key safe harbor is 100%/110% of your prior year tax liability. If the total of your withholdings and estimated payments for 2019 is greater than 100% of your 2018 tax liability (110% if your 2018 AGI was more than $150K) then you can pay the entire remaining liability by April 15, 2020.
There are multiple methods for determining how much tax you need to have had paid by each "quarterly" (April, June, September, January) due date and you are free to choose whichever method provides the lowest requirement for each date. You can change methods for each date as well. Forms 1040-ES and 2210 will generate the answers you need.
Don't forget to calculate any state income tax due to the state where the property was located and your resident state (if different). State rules for estimated payments are often different from the federal rules.
Ira Smilovitz, EA
Instead of mailing Form 1040-ES with a check, you can have
the estimated tax payment withdrawn directly from your bank
account by using Direct Pay on the IRS web site. Direct Pay
also collects the information that would be on the form, so
you don't have to mail anything. You do it all online.