Real Estate Investment sold January 2021 for profit. When do I pay taxes on it?

A real estate investment in which I had a share sold for a profit this month. My dad says I have to pay “quarterly estimated taxes” on it immediately or I would face penalties when I file in 2022. Is that true? If so how would I go about doing that? Thanks!

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  • Anonymous
    1 week ago

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  • 1 month ago

    It could be mostly true.  The estimated tax is four times a year, but not actually quarterly (there are one quarter with two payments, one quarter with no payments, and two quarters with one payment each), but the rest is basically correct.

    Fill out Form 1040-ES to see whether or not you need to pay estimated tax and how much.

  • 1 month ago

    Preparing a tax return involving sale of investment real estate requires extensive tax knowledge. This is not DIY stuff. Don't be foolish and think a computer program will instantly turn you into a tax expert. Find an independent tax office (the big box storefront tax prep places might have a person or two who really know what they're doing, but there are a lot of people with very little knowledge or experience, and they're very expensive).

    You'll have different types of gain on the sale, some is recapture of depreciation, some is capital gains, etc.

    Quarterly tax payments are made with 1040-ES and whatever state form. You have to pay tax in the period of the sale or you'll be hit with an underpayment penalty.

  • 1 month ago

    You need to do an estimate of how this profit will impact your tax bill for 2021.  It is important to avoid underpayment, which can trigger interest and penalty.  If you estimate that your tax bill for 2021 will exceed your tax payments by $1,000 or more, you should make a payment.  You do not have to make quarterly payments unless you are engaged in a business that is operating steadily.  If the estimated tax on this one-time event will be large, however, you can make quarterly payments to split it up.

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  • 1 month ago

    This income will be included on your 2021 tax return that you file next year.  However, you could be penalized if you don't make an estimated payment for the 1st Quarter of 2021 if you are going to owe more than $1000 at tax time next year.

    The first quarter 2021 estimated tax payment is due on 4/15/2021.  However, you can pay prior to that.

    https://www.irs.gov/payments

    https://www.investopedia.com/terms/e/estimated-tax... dad is partially correct.  You should pay in an estimate but you do not have to pay "intermediately"

    Also, don't forget about your state estimate if your state also has an income tax.

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