How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lane Your Own Question

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3901
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Tax Question Here...
Lane is online now
A new question is answered every 9 seconds

For Anne - From my calculations, the house cost basis would

Resolved Question:

For Anne - From my calculations, the house cost basis would be roughly 20K usd. Does this mean that $55K is taxable and we could potentially have a $12,000 tax bill? This seems crazy to me. It's not like we made millions on the house... My mother's freaking out about this now
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Lane :

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

Lane :

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

Lane :

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

Lane :

Hi, I was just getting ready to paste in the tax brackets so you could see where you mother is there

Lane :

This is for a single filer:

Lane :



















































For a single filer



Tax rate



C.Gain rate



taxable income from $0 to $8,925,



10%



0%



taxable income over $8,925 to $36,250,



15%



0%



on taxable income over $87,850 to $183,250



25%



15%



on taxable income over $183,250 to $398,350



28%



15%



on taxable income over $183,250 to $398,350



33%



15%



 



on taxable income over $398,350 to $400,000



35%



15%



 



on taxable income over $400,000



39.6%



20%



 




 

Lane :

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!

Customer:

thank you for responding

Customer:

i see... i didn't realize there were different rates for cap gains. i thought it was a flat rate of 20%

Customer:

she is filing as married, i would be filing as single

Customer:

what i was worrid about - if i estimate her cost basis as 20K and she sold the home for 75K

Customer:

the tax due would be 11K (55K*20%)

Lane :

Do you know about what her income level is?

Customer:

she is currently unemployed

Lane :

The thetax rate is zero

Customer:

her husband + her combined would probably be i nthe 80K

Lane :

Here are the rates for those filing jointly

Lane :

OH ok hang on

Customer:

regardless of whether she is married or not?

Lane :

and they file jointly right?

Lane :

it's about how they file

Customer:

yes they have been filing jointly

Lane :

ok, then here you go:

Lane :












































For a Married filing jointly filer



Tax rate



C.Gain rate



on taxable income from $0 to $17,850



10%



0%



on taxable income over $17,850 to $72,500



15%



0%



on taxable income over $72,500 to $146,400



25%



15%



on taxable income over $146,400 to $223,050



28%



15%



on taxable income over $223,050 to $398,350



33%



15%



on taxable income over $398,350 to $450,000



35%



15%



on taxable income over $450,000



39.6%



20%


Customer:

would it make sense for them to file separately in this case

Lane :

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

Customer:

ok... that makes sense

Customer:

thank you so much for your help

Lane :

You're welcome the standard deduction will be $12,200 and they each get 3900 as a personal exemption

Lane :

so they're under...

Customer:

we were really starting to freak out about this

Customer:

yes, i hadn't thought about the deductions and exemptions

Lane :

Was this their personal residence, by any chance?

Customer:

we haven't lived there in over 10 years

Customer:

it was rented out at some point

Lane :

OK, the you are right to be concerned (no personal residence exemption on gain) BUT they're fine any in this case

Customer:

there were also family members who lived there rent free during a period

Customer:

are they obligated to report the sale on their return in an case?

Lane :

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)

Lane :

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%

Lane :

BotXXXXX XXXXXne here is $55,000 x 0% = $0.00 capital gains tax

Lane :

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.

Lane :

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)

Lane :

BUT please let me know if you have any questions at all ...


Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3901
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 11 months ago.

Hi Jesse,

... Just checking back in here, as I never saw you come back into the chat.

And, yes they will need to report the sale.

But what will happen, as long as the ORDINARY earned income stays ANYWHERE around what you think for the joint return, the rate that gets applied to that gains will be Zero, because the personal exemptions and standard deduction will take their TAXABLE income WELL below that $72,500 level.

Let me know if you ave any other questions.

Lane

Customer: replied 11 months ago.

Thank you for your answer. This was very helpful. I rated your answer yesterday also. I will be back if I need anything else.

Expert:  Lane replied 11 months ago.

Thank you very much!

If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.

Thanks again,
Lane

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.