I would very much welcome your help regarding how to calculate our Modified Adjusted Gross Income, as the basis for our ACA income calculations.
We are planning
for our early retirement and part of our calculation is downsizing and the sale of our home. As our income during the period up to when we qualify for Social Security and other pension payments will be negligible, we will be relying on our savings to see us through these years plus some of the proceeds of the sale of our house before we downsize to a smaller home.
The gain on the sale of our current home will exceed the $500000 tax
exemption limit on the sale of a primary residence. This means that we will have a long term capital gain of approximately $100000 over and above the $500000 gain that is exempt in the year that we sell the house. However, as far as I can see, due to our negligible income during that year, our ordinary income tax
bracket will be 15% and we will therefore not have to pay tax on this gain as it will be classed as a long term capital gain which is taxable at 0% for our income tax bracket.
I have two questions:
Am I right to presume that the $500000 long term gain which is tax exempt does not have to be included in our MAGI?
Will we have to add the long term gain of $100000 taxable at 0% to our otherwise negligible income when we calculate our MAGI?
Many thanks in advance – your help will be much appreciated!