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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11374
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Is profit on sale of 2 nd home taxed at 15 percent Cash paid

Customer Question

Is profit on sale of 2 nd home taxed at 15 percent
Cash paid for 2 nd home in 1985, value of $66,000 paid, be increased by current inflation value of dollar, roughly 50 percent. Say $90,000. In other words, can the inflated value of the dollar be used in calculating the profit on the sale.
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Hi. My name's Lane. I can help you with this.

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First, so sorry, yes there is no capital gain exclusion on a 2nd home as their is on your primary residence.

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And the tax on the gain (the profit, if you will) is based on your TOTAL household taxable income for the year of the sale.

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Long-term gains are taxed at

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket

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The formula for calculating capital gain is as follows:

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Capital Gain = Sales price - tax basis

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And tax basis is what you purchased the property for PLUS any improvements PLUS any selling costs, such as real estate commissions

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SO here (without adding any improvements or sales commissions, which will raise basis, hence lower the amount of the gain) your gain would be 90,000 - 66,000 = 24000

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And if this is your ONLY income, there would be zero tax, as 24000 is under the 25% ORDINARY bracket (hence the 0% capital gains bracket) for both married filing jointly and single.

Expert:  Lane replied 8 months ago.

Here's a chart that shows how the cappital gains tax is dependent upon the ordinary income tax brackets

Expert:  Lane replied 8 months ago.

. … Please let me know if you have any questions at all, before rating me

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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