Have Tax Questions? Ask a Tax Expert for Answers ASAP
Can you determine what you've paid through out the years for the website? You probably deducted the expenses when you operated the business. Whatever you paid for the site will be your cost basis. With this amount, you can report the sale as a long-term capital gain. The only thing you could consider to lower what you pay this year in tax is to receive the payments in installments. This would push some of the income into future years. Hope this helps, Bill
My cost basis is probably about $10,000 -- so a long-term capital gain - what does that mean in dollars or pecentage to me? It might be possible to split the money in 1/2 this year and 1/2 next how would that help and if so by what percent or $ amount?
Taking all of the funds this year should leave you with a long-term gain of $176,000. The capital gains tax on this is $26,400, but your adjusted gross income will increase by that amount. This will limit the amount of itemized deductions you can claim. It could also limit your personal exemptions, and it will certainly cause the tax on your wages to increase A LOT. I'd take the money this year. Then I'd make a big estimated payment to the IRS and to your state to avoid being hit with useless underpayment penalties. Hope this helps, Bill
Help me follow this a bit better. $176,000 is long term gain, I'd pay $26,400 on that for capital gains - leaves me with $149,600. I'd have to pay personal federal and state income tax on the $149,600 - lets guess 149600 *.33 = 49368 for federal and 4488 for state (IL is a flat 3%). Leaves about $95,744. Take out an additional plus the $10,000 I have put into the domain name so roughly $105,744. My calcs OK so far? and Do I have to pay Medicare and FICA?
Pressed enter a little early -- take out an additional 1.45% for Medicare or about 2169.20 and perhaps a little bit for FICA. Brings my net down to about $100,000 +/- question is: I'm basing taxes on $149,600 (amount after capital gains is taken out) not $176,000 correct?
The easiest way to understand this is for you to look at page 10 of the instructions for Sch D. This is a worksheet for calculating your tax. I may be able to work through this with you later this eveing. Anyhow, here is the link, http://www.irs.gov/pub/irs-pdf/i1040sd.pdf. Hope this helps, Bill
I printed that out and will take a look. I'm not great with forms, just wanted a general feel for my net take on this deal. If I'm within 5 grand + or - of 100k I'm fine for budgeting. But I'll go through this, probably tomorrow and I'll get back to you if I have more ?'s. Thanks for your help so far.
No problem. I'll be away from the computer most of the day tomorrow, but if I see a message from you. I'll respond as quickly as I can.