Hi, it doesn't look like ANNE is on line right now ... (and I don't have the benefit of your previous question) BUT I bet this has to do with the difference bwtween the gains itself and the TAX ON the gain
If 12,000 is the gain (and remember capital gains taxes are lower than ordinary earned income taxes...can even be zero) then the TAX won't be 12,000 you just use the 12,000 to FIGURE the tax
The capital gains RATE is based on your ORDINARY income tax rate, and until you get to the 25% ordinary income tax rate the capital gains rate is zero
Hi, I was just getting ready to paste in the tax brackets so you could see where you mother is there
This is for a single filer:
For a single filer
taxable income from $0 to $8,925,
taxable income over $8,925 to $36,250,
on taxable income over $87,850 to $183,250
on taxable income over $183,250 to $398,350
on taxable income over $398,350 to $400,000
on taxable income over $400,000
So, as you can see, her income (if she files as single) would have to be over $87,850 for there to be any capital gains tax at all!
thank you for responding
i see... i didn't realize there were different rates for cap gains. i thought it was a flat rate of 20%
she is filing as married, i would be filing as single
what i was worrid about - if i estimate her cost basis as 20K and she sold the home for 75K
the tax due would be 11K (55K*20%)
Do you know about what her income level is?
she is currently unemployed
The thetax rate is zero
her husband + her combined would probably be i nthe 80K
Here are the rates for those filing jointly
OH ok hang on
regardless of whether she is married or not?
and they file jointly right?
it's about how they file
yes they have been filing jointly
ok, then here you go:
For a Married filing jointly filer
on taxable income from $0 to $17,850
on taxable income over $17,850 to $72,500
on taxable income over $72,500 to $146,400
on taxable income over $146,400 to $223,050
on taxable income over $223,050 to $398,350
on taxable income over $398,350 to $450,000
on taxable income over $450,000
would it make sense for them to file separately in this case
Don't need to By the time t they take their standard OR itemized deduction and personal exemptions their TAXABLE income will be below 72500 which as you can see means a capitla gains rate of ZERO
ok... that makes sense
thank you so much for your help
You're welcome the standard deduction will be $12,200 and they each get 3900 as a personal exemption
so they're under...
we were really starting to freak out about this
yes, i hadn't thought about the deductions and exemptions
Was this their personal residence, by any chance?
we haven't lived there in over 10 years
it was rented out at some point
OK, the you are right to be concerned (no personal residence exemption on gain) BUT they're fine any in this case
there were also family members who lived there rent free during a period
are they obligated to report the sale on their return in an case?
again, none of that really matters if he comes in at 80,000 ... because that's nly 60,000 taxable with the exemptions and the standard deduction for Joint filing ... (plenty of wiggle room there)
Yes, if this were the residence it would be excluded completely, but here they'll report but by the time myou get to the bottom of the return you'll see that the gains rate that will be applied will be 0%
BotXXXXX XXXXXne here is $55,000 x 0% = $0.00 capital gains tax
If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.
HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)
BUT please let me know if you have any questions at all ...
Thank you for your answer. This was very helpful. I rated your answer yesterday also. I will be back if I need anything else.