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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1557
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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My widowed 94 y/o mother wantt\s to sell her home: built in

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My widowed 94 y/o mother wantt\s to sell her home: built in 1954 at acost of app 70K
It has improvements of about $4,500 for new furnace, $7,500 for new roof, and about 17k for sun porch.

Her income consists of a retirment check monthly in the amount of $117.00
monthly, plus a $1,200 per month social security check. Thats her total inocme

She has been offered $615,000 for the home, and must pay off a $77,300 mortgage and pay sales agent repping the developer an agreed 3% commision.

How much, if any, capital gains tax will she have to pay of she accepts this offer for $615,000 based on these figures?

Arthur Rubin :

Thank you for using Just Answer. I will try to give a complete answer, but there may be situations in which the answer will depend on information you don't have, or don't want to reveal.

Arthur Rubin :

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

Arthur Rubin :

I'm entering the data to see exactly how much Social Security income is taxable; give me a few minutes

Arthur Rubin :

Federal tax (under 2012 laws) would be $32,441, calculated as follows:

Arthur Rubin :

Pension income: $1404.

Arthur Rubin :

Social income $14400, taxable = $12,240 (= 85%)

Arthur Rubin :

Capital gains = $247,550

Arthur Rubin :

Personal exemption = $3800

Arthur Rubin :

Standard deduction = $7400

Arthur Rubin :

Total taxable income = $249,994

Arthur Rubin :

Schedule D worksheet uses the following calculations:

Arthur Rubin :

taxable income disregarding capital gains = $2,444; tax on that amount = $244

Arthur Rubin :

The first $33066 ($35,500-$2,444) of capital gain is not taxed; the remainder is taxed at 15%.

Arthur Rubin :

I could work out the numbers for 2013, but it's probably about the same.

Arthur Rubin :

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.

Arthur Rubin :

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.

Arthur Rubin :

Have I answered your question?

Customer:

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 ?

Arthur Rubin :

That's correct, that's the amount of total Federal taxes. There will probably be Georgia taxes around $15000.

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