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Ray, Lawyer
Category: Real Estate Law
Satisfied Customers: 42818
Experience:  Texas Attorney for 30 years dealing in real estate
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Trying to calculate taxes (capital gains?) on a home my mom

Customer Question

Trying to calculate taxes (capital gains?) on a home my mom has to sell.
She had traded property worth $1,000,000 to purchase this home she has lived in for 12 years. The home had increased in value to $3,000,000. She had taken out a reverse mortgage and now owes $2,000,000. Her home is on the market for $4,000,000 now.
Less closing costs, we are trying to figure out the taxes she will owe and what she could possibly profit. She is 83 years old and receives about $1100 from social security.
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Ray replied 2 years ago.

Hi and welcome to JA. I am Ray and will be the expert helping you today.Here if the purchase price was 1 million and it sells for 4 million she owes the taxes on 3 million less any exclusions and deductions she can muster.

Here is a one time exemption of $250,000 if this was her principal residence for 2 out of last five years that would reduce the amount of taxes..

Also if she has to repay the reverse mortgage that further reduces the amount of the gain.

Here are the tax rates on the final amount..

Off the $4 million would come the loan payoff thats a chunk, the closing costs, the $250k exclusion, this should greatly reduce the amount she owes here if any..this is long term capital gains see the chart above for rates

I appreciate the chance to help you today.Please let me know if you have more follow up.Thanks again.

Expert:  Ray replied 2 years ago.

Looks like she might owe capital gains on say $1,750,000 less the $250,000 exemption so maybe taxes on $1,500,000

Here is the rate..

20% maybe $350,00 you may want to verify that with your tax preparer and also check to see if there are more deductions here.

I am just trying to give you a ballpark based on what I think you presented here.It is just that a guesstimate..