Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.
Unfortunately, retiring the mortgage on your home will not serve to reduce the gain or the tax thereon. Mortgage principal is not taxable when borrowed and, accordingly, is not deductible when repaid.
RATS!! I will now have to pay for an answer that I DO NOT WANT! But it is not your fault unless you crafted these cursed tax policies...
Before I accept your answer could you give me just a bit of guidiance on what I will expect? My regular income this year will be in the 60K - 80K range married with 3 kids. Just ballpark what will my total tax bill be from a $250K sale (over and above my regular taxes that I am accustom to?
Rats is correct. Sadly I do not make the tax laws.
The sale will generate a tax of approximately $37,500 at the Federal level and about 1/3 of that for state taxes.
To help reduce your tax burden you should consider accelerating payment of deductible items such as medical bills, real estate taxes, and of course, the state itself. Paying estimated taxes at the Federal and state levels will help avoid underpayment penalties later and the state payment will be deductible on the Federal return. The Federal form 1040ES is available at the following link www.irs.gov and the state estimated form is available at http://www.in.gov/dor/4439.htm The form is IT-9. You should be aware that if you sell the business you will need to watch the dues dates for the estimated payments. The next payment is due 9/15 and the following one is due 1/15/2012. If you wish to accelerate the state tax deduction you will need to pay it by Dec 31st.