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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28952
Experience:  Taxes, Immigration, Labor Relations
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I am on social security and in a low tax bracket. I sold my

Customer Question

I am on social security and in a low tax bracket. I sold my rental property this year 2008, and I believe I will pay low taxes and low cap gains. Correct? Next question : I also want to sell my residence. Is it better to sell it this year or in 2009? I get confusing information re what is happening with tax rates next year, and also have to consider that selling 2 houses this year could really put me in a high tax bracket.
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

If you are selling your primary residence and you owned and used it as a primary residence at least two out of last five years before the sale - the capital gain is excluded from your taxable income - up to $250,000 for singles and $500,000 for married coupled filing joint returns.

 

Selling the rental property is taxable event. If you owned the property more than a year - the gain will be taxed as long term gain at lower rates - not more than 15%.

The part of the gain that otherwise would be taxes at 15% or below will not be taxed in 2008 and 2009. The part that otherwise would be taxed at 25% or higher - will be taxed at 15%.

In additional - you would be required to recapture the depreciation depending on how long did you rent the property - that amount will be taxed as your regular income.

 

Please be advised that additional taxable income will push your adjusted gross income up - and as a side effect - your social security income will be partly taxable.

 

The Congress is discussing the option to increase tax rates - but there was no any decision this matter yet.

Please let me know if you need any clarification or need help to estimate your tax liability.

Lev and 3 other Tax Specialists are ready to help you
Customer: replied 8 years ago.
thank you