Hello how are you today?
Unfortunately, the answer to your first question is that none of the gain would be excluded. There are no exceptions to the 2/5 year rule for capital gain exclusion
She can deduct from the home sale what she initially spent on the house, plus any improvements she made over the years
What is included in improvements?
a new roof
anything to improve the home.
But not repairs, decoration, etc
Will she have to show records back to 50 years
Also, what is the long-term capital gains rate?
if she's audited, yes. She would need documentation
The long term capital gains rate is 15%, but if she's in the 10 or 15% tax bracket the rate is 0
If she's living off social security income, chances are good she's in those lower brackets
so if she had a 200K capital gains in the house, the 200K would not be taxed as income?
Further the 3.8% tax is only for those with an AGI over $200,000; $250,000 if married
Just one more question: so if the 200K capital gains is not counted as income, then she would not pay the 3.8% tax if her "income" is under 200K?
It is included in her AGI
It is just taxed at favorable rates
So with a 200K capital gains she would pay the extra 3.8%?
If her AGI is above $200,000 then yes
Ok, thanks very much!