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Capital gains = 615000 × (1 - 0.03) - 70000 - 4500 - 7500 - 17000 - 250000 (exclusion, assuming she's used the house as her main home for at least 2 of the past 5 years) = 247,550
I'm entering the data to see exactly how much Social Security income is taxable; give me a few minutes
Federal tax (under 2012 laws) would be $32,441, calculated as follows:
Pension income: $1404.
Social income $14400, taxable = $12,240 (= 85%)
Capital gains = $247,550
Personal exemption = $3800
Standard deduction = $7400
Total taxable income = $249,994
Schedule D worksheet uses the following calculations:
taxable income disregarding capital gains = $2,444; tax on that amount = $244
The first $33066 ($35,500-$2,444) of capital gain is not taxed; the remainder is taxed at 15%.
I could work out the numbers for 2013, but it's probably about the same.
So, if her total income (including capital gains) was less than $35,500, then none of the capital gains would be taxable, which may be what you lawyer was saying. But that's not the case, here.
If she was widowed less than 2 years before the sale, then she would be entitled to a $500,000 exemption, and no tax would be owed, but I don't think that's the case.
Have I answered your question?
Thanks Arthur, I believe you have. But, just to be sure if I understand: the botXXXXX XXXXXne is: she will be paying approximately $32,441 K in total taxes INCLUDING capital gains? In other words, approximately 250 K in taxable income (actually $249,994 at 15% equals $32,441 INCLUDING capital gains and regular income ?
That's correct, that's the amount of total Federal taxes. There will probably be Georgia taxes around $15000.