The Tax Implications of Selling a Rental Property in 2021

Understanding your tax situation is essential when you’re thinking about selling a rental property. As you are undoubtedly aware, selling a property involves jumping through some hoops, and Ohio taxes can get confusing. Not to worry, though; we’re going to dive into the nitty-gritty right here. We’ll take a look at how tax assessments work, the concept of depreciation, selling a second home, how to avoid paying capital gains, and ultimately, the tax implications of selling a house this year.

Let’s get started.

Selling a rental property like this ugly, daffodil yellow house can be tough.

How are property tax assessments done?

HowStuffWorks explains that property gets segmented for assessment purposes. It’s similar to the way a salesperson is assigned a territory or how a district is broken up for voting. These sectors are called “assessment areas” or “assessment units.” One assessment unit could be a whole city, or a single school district — the idea is that each tax assessor gets an area that is theirs to assess. The tax assessor will then perform property tax assessments within that area. To make the task more manageable, the assessor doesn’t actually visit every single property.

“Assessments are made by comparing the market value of similar properties. For example, if Mr. MacDonald sells his farm at a price close to his asking price, the tax assessor can use that sale price as a basis for the property tax assessments of farms similar to Mr. MacDonald’s.”

Now, with our newfound understanding of tax assessments in mind, let’s take a look at a little something called depreciation.

Ready to skip to the calculations? Plug your information in here:
Rental property tax calculator

What is depreciation?

If you’ve ever purchased a brand new car off the lot, you may be familiar with the borderline tragic effects of depreciation. By the time you’ve driven that car home, its value has already depreciated substantially. Of course, all sorts of other assets are subject to depreciation too, including rental properties.

TurboTax explains the ins and outs of claiming rental property depreciation. But essentially, if your property is “in service” (i.e. you’re generating income from it), you can file for a tax deduction.

What happens to depreciation when you sell a rental property?

As Motley Fool Contributor Jean Folger notes, when you sell a rental property on which you have claimed depreciation, you’re subject to an IRS procedure known as “depreciation recapture.” Basically, the IRS is going to come to you and say, hey… we’d like some of that money back now. This is where capital gains taxes come into play.

Blue 1970's style house with a patchy front lawn.

What are capital gains?

As another TurboTax article explains, a capital gain is an instance where you sell an asset for more than you put into obtaining it (as The Motley Fool notes, this includes all money spent on improvements and acquisition costs).

With this in mind, it’s easy to see how a rental property in an up-and-coming neighborhood could later be sold for much more, leading to a substantial capital gain.

How to avoid capital gains taxes when selling a rental property

If you’re wondering how to avoid capital gains tax when selling a rental property, you have more than a few options. David John Marotta for Forbes identifies 14 methods for avoiding the tax. I’ll briefly cover some of the key ones here, based on the information Marotta provides.

1031 exchange
A 1031 exchange is a relatively complex mess of paperwork. However, it’s a pretty effective way to avoid paying any capital gains tax. Basically, when you’re selling a rental property, if you take the sale income and roll it over into a “similar type of investment” inside of 180 days, you won’t have to pay the tax.

Stock exchange
Investors with valuable securities can apply for a stock exchange with services that will trade out their stock for a similarly valued but more diversified portfolio. This service can be pricey, but it may assist you in your quest to not pay such a high capital gains tax.

Health Savings Accounts
Contributing money to health savings accounts can make you eligible for a tax deduction. HSA growth isn’t taxed so long as you spend any funds you withdraw on eligible medical procedures.

Roth IRA and 401k
Investing in a Roth IRA or 401k can help grow your finances by either pushing tax payments to a better year or, in the case of a Roth IRA where taxes are paid upon deposit, allowing you to not pay them ever again.

Give stocks to family members
You can gift some of your stocks to family members in lower tax brackets. This can be of particular use to landlords in especially high tax brackets. Your family members will then “assume your cost basis for computing the gain but use their own tax rate.” This can be a super helpful way to avoid paying capital gains taxes.

A brown multi-unit building with a front porch.

Landlords have to deal with capital gains/capital losses and the resultant taxes every time they sell a rental. One exception is if you happen to have bought the property prior to September 20th, 1985.

Also of note: capital improvements made on a property decrease your capital gains on that property.

Selling a second home & the capital gains tax

According to Matt Frankel’s Motley Fool article, your capital gains taxation on a second home depends on three things:

  • Length of homeownership
  • Capital gains tax rate
  • Your net profit

If you owned the home less than a year, you will pay taxes differently than if you’ve owned it for two. Besides that, your income and net profit on the rental will determine your situation.

As a bit of good news, it should be easier to dodge capital gains taxes on the sale of a second home than it is on a rental property. This is because while income-generating buildings (like rentals) are subject to capital gains taxes, your primary residence gets an exclusion. A second home is neither of these and as a result, the laws for second homes are somewhere in the middle according to Frankel.

What happens if I don’t pay my property taxes?

Well, the IRS isn’t going to send you a Harry & David box with a big red bow on it… If your property taxes aren’t paid, you could face a fine and have your property seized. Not paying your taxes can also reflect poorly on your credit score, making it difficult to purchase other properties. Please consult IRS Publication 594 for more on this.

Selling a rental property to a cash house buying team

If all of that sounds exhausting and time-intensive, you might consider selling your rental to us. Upward Home Solutions is a neighborhood revitalization company. We’re ready to take any property off your hands without all the hassle (closing costs, taxes, renovations, etc.).

Does your property need repairs? No problem — while you may not be able to sell as-is on Zillow, my wife and I actually prefer to do the repairs ourselves in many cases.

If you need to sell your rental house and would like to get a no-obligation cash offer, call us today at (614) 705-0866. Whether you decide to sell to us or not, we’re happy to help answer any questions you may have about the process.

Selling a House During the Pandemic

If you’re wondering what is the best method for selling a house during the pandemic, Upward Home Solutions has a service to help you.

These are stressful and uncertain times. First and foremost, I’d like to extend our best to you and your family. Our top priority is promoting public health and safety. Together, we hope you are taking the necessary precautions along with us to stop the coronavirus in its tracks. 

selling a house during the pandemic of COVID 19

Unfortunately, the fear and fallout surrounding this pandemic are not confined even to our physical wellbeing. For many in our community, this situation is also a financial concern.

Many homeowners are realizing that finding a realtor and listing on the MLS has never been more difficult than it is right now.  When you list with a realtor, you are contracting with someone to help you sell your home. Upward Home Solutions works differently. We want to buy your home. We will give you cash for my house.

For homeowners, selling a house during the pandemic presents some unique problems. We buy your house.

Here’s some good news for homeowners:

Home prices remain strong despite a very volatile stock market. Equity in homes has never been higher. Selling real estate is still a viable option, despite it being difficult to find a realtor and go through that whole process for selling a house during the pandemic.

At Upward Home Solutions, we believe that now, more than ever, the first priority of any business should be to lift up its community. We understand the constraints that a tough market can put on a homeowner’s wallet. So if our services can help you with selling a house during the pandemic, we want to hear from you. 

selling a house during the pandemic is tough

What is the process of selling a house during the pandemic?

If you were counting on selling in the near future, you might be wondering how in the world to do that now. Many things have changed about selling a house during the pandemic.

Upward Home Solutions remains in a unique position to buy your home quickly. We can streamline the process and put cash in your hand when you really need it—no waiting on bank approvals or inspections. We’ll close on your timeline, in as little as a couple weeks. 

We are buying houses, and people are still selling a house during the pandemic. New procedures keep you and your family safe while eliminating stress and uncertainty.

Rental Properties

Many landlords have been watching governmental developments. Those relying on rental property income for their own bills may have trouble with the moratorium on evictions. The laws seem to change weekly. It’s a headache keeping up with all the new rules.

We get it. Selling a house during the pandemic is a tricky situation.

If you are a landlord and you’re wondering about selling a house during the pandemic, UHS is in a position to purchase property regardless of occupancy or lease status. We will assume your risk and all that goes with it. 

How we are adjusting our services for selling a house during the pandemic:

As mentioned above, health and safety remain priority number one. Thankfully, UHS is able to limit and do away with the need for close proximity as we fight the spread of this virus. When selling a house during the pandemic, you will want to be extra careful.

If you’re curious about your options with UHS, we’ll get you on a phone call with Amy, who can answer any questions you have and outline our process in more detail to help you with selling a house during the pandemic.

greetings when selling a house during the pandemic

After a quick greeting with Tim at your appointment, don’t be offended when he keeps his distance. We’re being very cognizant of health protocol. Tim’s car will remain stocked with hand sanitizer and wipes, and you have our word that he won’t go on any appointments if he or anyone in his family is feeling unwell. Tim always wears a face mask to every appointment.

Tim will take photos and videos of your house so that we can assess value without sending anyone else to walk through your property. However, we are also offering two alternatives to in-person appointments.

  1. We can make “curb offers” where we don’t even have to come into the house. 
  2. Homeowners can leave keys for us in a lockbox and we can go through when no one else is there. 
Tim Smith headshot photo
Tim Smith

As always, meeting with Tim and getting an offer doesn’t mean you have to sell your house to us. We would never pressure you into doing something that isn’t right for you. Our business has always been based on trust. Meeting with Tim simply gives you one more option that you didn’t have before for selling a house during the pandemic.

If you need a fast house sale, we can finish the purchase of your house in less than a week.

Homeowners do not even have to show up in person to the closing. 

We use digital signatures for the contracts and for closing documents. Recently, Upward Home Solutions purchased a home from a man who lives in the Caribbean. We never met the homeowner in person. Nonetheless, we were able to use a notary in his home country, digital signatures, and a wire transfer for payment.

At the end of the day, selling a house from a remote location is always difficult. Selling a house during the pandemic is even harder. Fortunately, Upward Home Solutions is an expert in non-traditional sales.

We’re In This Together

Stay safe, stay strong. If there’s anything our business can do to help you, please let us know. Selling a house during the pandemic is a unique situation. Nonetheless, we have many ways to help.

We built Upward Home Solutions on a belief in community and on finding ways to serve ours. If we can help in your situation, please let us know.    

Amy is ready to answer your call. She will explain our process for selling a house during the pandemic.

614-705-0866

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The Team at Upward Home Solutions

More About Upward Home Solutions

Upward Home Solutions has been helping homeowners since 2005. We have bought hundreds of houses in Columbus, OH. If you want to sell my house fast, there’s no company with more experience and professionalism. UHS is Central Ohio’s #1 company for buying homes from people who are selling a house during the pandemic.

Maybe you have seen the “we buy houses” signs. That’s not us. Our business is built on relationships. Our best source of houses comes from referrals.

You can read reviews from happy clients.

Selling a house during the pandemic is safest with Upward Home Solutions. So if you’re wondering, How can I sell my house online? we’re here to help.

We specialize in difficult situations. Realtors are wonderful, but they aren’t right for everyone. When selling a house during the pandemic, selling to cash buyers like Upward Home Solutions may be your best option.

My situation is unique

We work with homeowners in unique situations everyday. Tim S is amazing when with working with families or couples who disagree on what should be done with the home.

UHS buys inherited houses that are in probate. We can help with the transition to senior care or a nursing home.

If you owe taxes or have liens, we can help. If your house is messy, you can take what you want and leave the rest. You can sell my house as is fast.

Upward Home Solutions can make selling a house during the pandemic less stressful, emotionally, and financially.

Find A House, Get $$: Our Referral Program

Find A House, Get $$: Our Referral Program

We pay you for each and every referral that leads to a sale.

Upward Home Solutions is looking for people who want to partner with us in our mission to revitalize neighborhoods, one house at a time.

Know of a house in need of a fix-up? You don’t have to own it and it’s easy to submit a lead. Click here to get started.

Columbus’ Own Fixer Upper Couple


Have you ever wondered where the Fixer Upper power couple, Chip and Joanna Gaines, find the houses for their business? They have a network of people who are constantly searching for their next flip. Of all those homes, they then choose one that has good bones, lots of potential, and a fair asking price.

The Owners, Tim and Katie

Tim and Katie are the fixer-upper power-couple in Central Ohio, and they’re looking for their next renovation. But they need help.

our referral program is the best
Tim and Katie

Do You Know A House That Fits These Descriptions?

**Do you know of a vacant house in your neighborhood? The windows are always dark, no one shovels the sidewalk in the winter or mows the grass in the summer. You don’t remember how long it’s been since you’ve seen a car in the driveway.

**Maybe you have an uncle who is retired. He lives alone and hasn’t done much to the house since he bought it 30 years ago. There is wallpaper in the hall and a pink sink in the bathroom. Your uncle has been talking about how nice it would be to buy a condo in Florida and be a beach bum, but something is holding him back.

**Or perhaps you have a good friend who owns a rental house. At girl’s night out, she was talking again about how freakin’ hard it is to find a good tenant. Her husband hates spending weekends doing handyman jobs at the property and it’s stressing them both out. They like the income, but there’s just too much going on right now to handle it all.

We want to hear from you!

Upward Home Solutions has services to fit every need.

We buy houses as-is so people don’t have to fix them up. Even better, they can take the stuff they want and leave the rest.

Our company uses technology to help people who have mobility issues or live out of state. We recently bought a house from a man who lives in the Caribbean. He did not have to travel back to Ohio for the closing, saving him time and money. Moreover, our title agency will come to you, even if that means driving to meet you at a nursing home.

We recently had one elderly couple who were ready to move on to the next stage in their lives. We were thrilled to be able to offer a win-win solution, and check out the amazing transformation we put their house through!

And many of these amazing properties come to us from our network of friends, Realtors, and through social media.

How It Works

1. Send Us The Info

You give us as much info as you know about the house. At a minimum, we need a property address. If you know the name, phone number, and/or email address for the owner, that’s even better. But don’t worry if you don’t have the owner’s contact information. We can figure that out.

Email information to Upward@614Houses.com

Call us at 614-705-8066

Submit the information on this form.

Be sure to include your contact information because we will tag the lead with your name. That’s how we know who to pay!

2. We will take it from there.

We’ll contact the homeowner. If the homeowner is interested in selling, we will set up an appointment to visit the house and make an offer.

3. If they accept the offer, Upward Home Solutions will give you $100.

You get your choice of a Cameron Mitchell gift card, an Amazon gift card, or cash. We will get in touch with you and ask you how you would like to receive your gift.

It’s that easy! One email or phone call is all it takes to get the process started.

cash for your referral

Check out our Referral Program FAQ or give us a call if you have any further questions!