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Ask taxmanrog Your Own Question
taxmanrog, CPA, MST, MA
Category: Capital Gains and Losses
Satisfied Customers: 627
Experience:  Licensed CPA with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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What capital gains tax exception applies for a property

Customer Question

what capital gains tax exception applies for a property purchased in 1991 for $85000 and being sold today for $340000 or what tax will be payable
Submitted: 9 months ago.
Category: Capital Gains and Losses
Expert:  taxmanrog replied 9 months ago.

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

What kind of property is it? If it is just a piece of investment property, the difference between the sales price ($340,000) and the cost ($85,000) is long term capital gain. This gain ($255,000) is taxed at either 15% (tax would be $38,250) or 20% (tax would be $51,000) depending on the Taxpayer's income from all sources. The base Long-Term capital gains rate is 15% However, if it exceeds a threshold (varies by filing status) the tax rate jumps to 20%. And, on top of that, there is a 3.8% Net Investment Income Tax (NIIT) which would be another $9,690.

There are some variations that could come into play. If the property was rental real estate, the gain would be increased by any depreciation that had been taken on the property. This additional gain would be taxed at ordinary tax rates as "depreciation recapture".

Also, if this property were a principal residence for the Taxpayer(s), they could exclude $250,000 of the gain for a single person or $500,000 of the gain for a married couple. This holds true if they lived in the property for a total of 2 years in the immediately prior 5 years.

I hope this answers your question! If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great week!


Expert:  taxmanrog replied 9 months ago.