my mother is selling her home my father died 5 years ago. together they paid 256,000 for it and the selling price will be 623,000 what will she have to pay in taxes. she is 85 and has retirment income of about 50,000 a year. she is currently in assited living which costs about 50,000 a year...
nothing yet just want to be prepared so that we can avoid high tazes...maybe gift the heirs
I'm going to provide a quick summary, and ask a few more questions. I'll return this evening with a more detailed response. If that's not acceptable, please opt me out, or, if I see it, I'll opt myself out.
Your mother's basis in the property was stepped up when your father died; depending on the form of ownership (joint tenancy, tenants in common, community property, or another form), her basis is either the fair market value of the home at your father's death, or the average of $256,000 and that fair market value. Other adjustments for improvements may also increase the basis.
Assuming the assisted living expenses qualify as a medical expense, she has approximately $46.250 in medical itemized deductions, probably leaving a negative taxable income, disregarding capital gains.
Capital gains are taxed at at most 15%; however, that part of capital gains corresponding to income in less than the 25% bracket is tax-free.
Unfortunately, she may also be in an odd area for Alternative Minimum Tax. Without further details, I could not guarantee that AMT would not be in effect, and her tax would not be 26% of her income ($50,000) + 15% of the gain ($623,000 - basis - $250,000)
If she lived in the house for at least 2 of the 5 years preceding the sale, she probably qualifies for the $250,000 capital gains exclusion.
All this assume that we're talking about the United States capital gain taxes; if she lives in another country, the rules would be different.
It's most likely that the tax would only be around 15% of the gain, all things considered, but I would need more information to confirm.
I'll check back this evening
Mom lived in the home with my Dad for 10 years before he died, and 6years by herself the home is in california. The oringial title was joint tenancy, but the title is also in the family trust which Mom and Dad did in 1999. However at the time of dad's death Mom did not take Dads 250,0000 and put that in the trust. She did change the title to her as dad had died. her medical is tax deducable. So we , the famuly wonder if she should gift 50,000 to 5 heirs(10,000) each to not have to pay a lot of taxes
Over 22 years of tax preparation experience.