re: Thinking of selling our rental property

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We lived in the house for 7 years before we borrowed against it to byy our residence now .

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If you have resided in the rental house for 2 out of the prior 5 years the house can be sold and the sale of primary residence exclusion of $500,000 for married couple ($250,000 for single)can be used to offset the gain on sale.

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We still have quite a bit of equity in it as well.

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Equity is not a factor in determining gain on sale.

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What would some of the tax implications be?

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You will be taxed on Gain on Sale

Basically:

Sales Price - Selling Costs - Basis + Depreciation = Gain on Sale.

Another factor to consider is how was the property acquired:

If purchased by you, your basis in the Property is purchase price + any additional costs of improvements that you can document less any depreciation taken on the rental.

If inherited or received as a gift from a still living relative, your basis will be the same as the basis of that relative plus any additional costs of improvements that you can document less any depreciation taken on the rental.

If inherited from a deceased relative it becomes more tricky to calculate basis. Due to the death there is a step up in basis to either the Fair Market Value of the Property at date of death or the appraised value of the Property at date of death. Very seldom is an appraisal made at Date of Death unless we are talking about an estate of over $5,000,000 for the prior few years. Obtaining a Fair Market Value appraisal for an at least 8 year old transfer of Property is difficult.

Hope this helps.