I asked our cpa how our taxes will be affected if we sell our rental property. Most of the funds of the sale will be going to the mortgage company and we’ll pocket about $20,000. That $20,000 will go to pay down my husbands stock plan loans (he can borrow against it). Our cpa said we’ll pay capital gains on the total gain.
In my understanding, that means that the difference in what we are getting ready to sell it for minus what we paid for it, is what we have to pay taxes on. If that is correct, that doesn’t make sense as the mortgage company is getting their money back (including what we already paid so far) so we shouldn’t have to pay taxes on anything over that except what we pocket.
I think I’m just confused. I know there was an initial pocketed amount we got when we first mortgaged the property back in the 1990’s (as it was purchased directly from the owner), but I couldn’t tell you what that was and it was refinanced again after that (our current loan).
I'm trying to get it straight in my head and figure out what % that will be taxed and the amount we’ll be paying on. Also if we are going to need to have more taxes taken out of our pay to account for the capital gain tax. Thank you!