Tax Planner - Capital Gains tax

DR806

Generally speaking, does Tax Planner have an issue with figuring tax on a Capital Gain from the sale of rental property?
I plugged (user entered) the Capital Gain (long-term) amount into Tax Planner after figuring the Capital Gain using TurboTax. Bottom line, TurboTax figured a very different and much higher tax on the same info Quicken had. TurboTax says theirs is correct, and I believe them, but Quicken's tax is much lower, even on a higher Taxable Income!
I'm just trying to understand if there is a weakness in the Quicken Tax Planner regarding this type of Capital Gain, or if I need to search for my own mistake in Quicken Tax Planner.
Thanks

J_Mike

Frankx said:

Hi @DR806,

Is the difference only in the calculation of the tax on the sale of the rental property, or is it also caused by othergains/income?

Frankx

Further to @Frankx's comment - one example of added taxes on a rental sale.
If you did not do a 1031 exchange, you will be subject to depreciation recapture which can be a significant tax liability. TTax will include this added tax if applicable. Quicken has no provision to address the depreciation related issues.

Frankx

Hi again @DR806,

I just thought that I'd make some observations based on the limited information that you've provided.

First, the calculation of the taxable gain on the sale of a rental property is much more complex than the typical capital gain calculation (like on the sale of securities and other assets).  The main complication has to do with depreciation that has been taken on the rental property (obviously there is not depreciation on most capital assets) and the fact that some of that must be "recaptured" and will be taxed at ordinary income tax rates (i.e. higher), rather than capital gains tax rates (i.e. lower).

Also the Q tax planner (remember it isn't a tax preparation program) is actually only meant to provide an estimate, and as such it doesn't come close - in many situations where there are complexities - to performing a comprehensive calculation.

So, I m not at all surprised that the tax per Quicken was "much lower" than from Turbo tax - that, in large part, is I suspect because of the difference between ordinary and capital gains rates.

Hope this helps.
Frankx

It should be noted that tax laws and regulations are complex, that I am not providing tax or legal advice in this or any other posting, and Community members should consult with their own tax and/or legal advisors before taking action.

Frankx

Hi @DR806,

Is the difference only in the calculation of the tax on the sale of the rental property, or is it also caused by othergains/income?

Frankx

DR806

Hi @Frankx
Hard to tell for sure, but I think probably on the Capital Gain. There is only one Capital Gain, and it's related to a Sch E loss. There is other income (Sch C and Wages), but all that is fairly straightforward. I did not attempt to compare the tax amounts between the two programs without the Capital Gain. I just know Capital Gains can have different tax rates (maybe?), but do not know a lot about them. I was just thinking (hoping) that Tax Planner might be rather weak, or maybe not very exact, on this specific issue, and that's what caused my difference.
Thanks

J_Mike

Frankx said:

Hi @DR806,

Is the difference only in the calculation of the tax on the sale of the rental property, or is it also caused by othergains/income?

Frankx

Further to @Frankx's comment - one example of added taxes on a rental sale.
If you did not do a 1031 exchange, you will be subject to depreciation recapture which can be a significant tax liability. TTax will include this added tax if applicable. Quicken has no provision to address the depreciation related issues.

Frankx

Hi again @DR806,

I just thought that I'd make some observations based on the limited information that you've provided.

First, the calculation of the taxable gain on the sale of a rental property is much more complex than the typical capital gain calculation (like on the sale of securities and other assets).  The main complication has to do with depreciation that has been taken on the rental property (obviously there is not depreciation on most capital assets) and the fact that some of that must be "recaptured" and will be taxed at ordinary income tax rates (i.e. higher), rather than capital gains tax rates (i.e. lower).

Also the Q tax planner (remember it isn't a tax preparation program) is actually only meant to provide an estimate, and as such it doesn't come close - in many situations where there are complexities - to performing a comprehensive calculation.

So, I m not at all surprised that the tax per Quicken was "much lower" than from Turbo tax - that, in large part, is I suspect because of the difference between ordinary and capital gains rates.

Hope this helps.
Frankx

It should be noted that tax laws and regulations are complex, that I am not providing tax or legal advice in this or any other posting, and Community members should consult with their own tax and/or legal advisors before taking action.

DR806

Hi @Frankx and @J_Mike

Ah, depreciation recapture... particularly at the higher rate is most likely what caused the tax liability in TurboTax to be more. Knew there was depreciation recapture, didn't realize the tax rate could be so different. Should have known.

Again, I had just plugged the Capital Gain number into Tax Planner and since Quicken had most of my other data, was expecting a different (lower) tax liability once I got thru in TurboTax.
(By the way @Frankx , Quicken had the lower tax liability.)

Thank you both VERY much. I believe that explains it.