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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4540
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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What are the tax rates (federal and state) payable on the gain

Resolved Question:

What are the tax rates (federal and state) payable on the gain if a house is sold for a value higher than what it is acquired for? I understand the gains tax is avoidable if the gain is te invested ? Can you provide more details please or a link to irs with the explanation. Thank you
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

First, the gain is completely excluded (250,000 for those filing as single and $500,000 for those filing jointly)

Lane :

IF the house is your primary home (lived in the home for 2 out of the last five years)

Lane :

The requirement to reinvest was how the rule worked prior to 2008. Now the gain is simply excluded ... and given the 2 year as primary residency rule, you can effectively do this every 2 years now.

Lane :

.

Lane :

Now, if this is simply an investment, then the capital gains rates are as as follows:

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%



taxable income over $36,250 to $87,850



25%



15%



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



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 :















































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%



Lane :

On last thing:

Lane :

There IS a 1031 exchange rule that DOES let one defer that gain (on NON-residence, like kind, property exchanges) if the house being sold is being exchanged for a property that wil used used substantially in the same way:

Lane :

Here's the IRS guidance on that:

Lane :

SO, to recap, (1) if this is your primary residence the gains is actually excluded and there is no longer the requirement that you roll the gain into another primary residence (2) If this is an investment or business property, then you may be able to defer the gain, if you meet several criteria.

Lane :

Hope this has helped

Lane :

Lane

Lane :

].

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 :

Please let me know if you have any questions at all, though

Lane :

Lane

Expert:  Lane replied 1 year ago.


Hi,

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

Please let me know if you have ANY questions at all

Lane
Customer: replied 1 year ago.
Thanks, XXXXX XXXXX the cap gains tax rate payable by non US (foreign) owners of an LLC if the property owned by this LLC
Expert:  Lane replied 1 year ago.

Generally, a foreign person is not subject to U.S. capital gains tax on the sale of U.S.-sitused capital assets.

The Foreign Investment in Real Property Tax Act (FIRPTA), however, created an exception to that rule for U.S.-sitused real property.

Under FIRPTA, a foreign person’s gain on the sale of U.S. real property is treated as income effectively connected with a U.S. trade or business.

As effectively connected income, such gain is subject to regular U.S. income tax rates. As such, if the U.S. real property is held by a foreign individual, qualifies as a capital asset, and was held for at least one year, any gain will be subject to the lower capital gains tax rates.

Because LLC's do not pay taxes (they are a pass-through entity) tax is paid at the individual level.



Hence, we are back to the original answer; and your capital gains rate depends on your filing status (single vs married) and the amount of your other income.

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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%

taxable income over $36,250 to $87,850

25%

15%

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

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%

 



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%





And finally, regarding deferring the gain, by reinvesting, as mentioned above, you may elect a 1031 exchange by investing the proceed in a like kind (used in the same manner) property, if done through a qualified intermediary.




Hope this helps

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4540
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 3 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.
Thanks much!

Let me know if I can help again.

Lane

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Lane
Lane
JD, MBA, CFP, CRPS
3667 Satisfied Customers
Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986