Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Dear PDtax, I would very much welcome your help regarding

Dear PDtax, I would very...
Dear PDtax,

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!

Krysia Bell
Show More
Show Less
Ask Your Own Tax Question
Answered in 9 minutes by:
11/7/2013
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,781
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified

PDtax :

Welcome to the site. I'm PDtax, and thanks for asking for me.

PDtax :

As you know, ACA income starts with MAGI, which includes any reportable capital gains. The $500,000 gain is excluded, but the $100,000 would be part of MAGI.

PDtax :

I see you are in chat. I will be away to take the dog for her walk, but back in a few minutes if you have questions.

Customer:

Just so I understand correctly - the $100,000 gain would be included in MAGI because it does not fall under a tax exemption and it is subject to tax even if the tax rate is 0%?

PDtax :

yes. it is included in MAGI, even at a discounted tax rate.

PDtax :

Thanks for waiting. did you need anything else?

Customer:

Thank you for the answer and apologies for the wait - What year would the MAGI including our $100000 affect our Obamacare income calculations? For example if we sold the house in 2014 would that affect our subsidies? What I am trying to say is which year would we loose our subsidies following the sale.

Customer:

Thank you for the answer and apologies for the last post - I sent it before it was finished - What year would the MAGI including our $100000 affect our Obamacare income calculations? For example if we sold the house in 2014 would that affect our subsidies? What I am trying to say is which year would we loose our subsidies following the sale.

Customer:

Thank you for the answer and apologies for the last post - I sent it before it was finished - What year would the MAGI including our $100000 affect our Obamacare income calculations? For example if we sold the house in 2014 when would that affect our subsidies? What I am trying to say is which year would we loose our subsidies following the sale.

Customer:

Is Obamacare based on the previous tax year or on the current one, i.e. if we sell in 2014 do we loose our subsidies in 2014 or do we loose them in 2015? If it is based on the previous year, if we file a tax return for 2014 in April 2015 what do we say is our income is in e.g. January 2015 before we have actually filed the return? Presumably after April 2015 we will have to declare an income including the $100000 for Obabmacare but how long will that be valid? Would that figure be valid until December 2015 or until the next tax return is filed e.g. in April 2016? Please do let me know if this is understandable...apologies in advance if it is not.

PDtax :

The basis for calculating the 2014 subsidy initially is the prior year's income. 2013 income is the basis. That way the income can be proven at IRS.

PDtax :

Sell in 2013, your 2014 ACA subsidy is based on your 2013 income.

PDtax :

There is a timing difference, based on the year needed to assemble the information.

PDtax :

Thanks for asking for me, and thanks from Just Answer. I'm PDtax.

PDtax :

Positive feedback closes out your question.

Customer:

I am sorry I don't understand when you say "There is a timing difference, based on the year needed to assemble the information" - coudl you please explain what you mean.

PDtax :

2014 health insurance cost will be based on 2013 income for tax credits, a year's time lag, or difference.

Customer:

So does that mean that we can submit the Magi figure for 2014 in January 2015 before we submit our actual tax return in April?

PDtax :

As a basis for the prepayment of the tax credits, yes. Then, once the income tax returns are filed, the amount of the gov't participation will be confirmed.

Customer:

Many thanks - I understand now! Best regards

PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,781
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified
PDtax and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask PDtax Your Own Question
PDtax
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,781
4,781 Satisfied Customers
Experience: 35 years tax experience, including four years at a Big 4 firm.

PDtax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,312 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,362 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

14,120 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,652 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
If I don't have any ordinary income, only social security
if I don't have any ordinary income, only social security and have a long term capital gain from the sale of a business, how would it be treated for tax purposes? … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,095 satisfied customers
If I don't have any ordinary income, only social security
Second opinion] if I don't have any ordinary income, only social security and have a long term capital gain from the sale of a business, how would it be treated for tax purposes? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I want to sell stock which will give me a term capital gain.
I want to sell stock which will give me a long term capital gain. The difference between the cost basis and the sale is $131, 200. Is this the amount that would be listed on line 13 of the 1040 tax re… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,811 satisfied customers
Under the new tax plan if my federal adjusted gross income
Under the new tax plan if my federal adjusted gross income is $77,230.00 how much are my federal taxes? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,811 satisfied customers
What are the turm capital gains tax on properties that are
what are the long turm capital gains tax on properties that are in germany? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
On line 37 my 2015 Form 1040 I had an adjusted gross income
On line 37 my 2015 Form 1040 I had an adjusted gross income of $291,546. on my Amended 1040X for 2015 I have taxable income of $179,542. How do I get proof of this to get an adjusted MAGI to give to M… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,811 satisfied customers
If I am reviewing my 2016 Income Tax Returns, which are
If I am reviewing my 2016 Income Tax Returns, which are itemized. (Married, 2 children)Add Line 40 (Itemized Deduction) + Line 42 (Exemptions ($4050 x 4 = $16,200)) which I would subtracted from Line … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,095 satisfied customers
FOR GUILLERMO: What line on the 1040 income tax return is
FOR GUILLERMO: What line on the 1040 income tax return is used to determine the sponsor's income for Form I-864? Is it line 22: TOTAL INCOME? Or, line 37, ADJUSTED GROSS INCOME?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
W, is there a amend tax return there at IRS there for me? My
Hi, my name is ***** ***** Miller, is there a amend tax return there at IRS there for me? … read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
64 satisfied customers
I'm working to understand capital gains tax for California
I'm working to understand capital gains tax for California property purchased 4 years ago. It's a primary residence, purchased 4 years ago for $385k with $285k principle outstanding. Expected sale price of $630k … read more
abci168
abci168
Principal
27 satisfied customers
I'm canadian who want to understand capital gains tax rate.
Hi, i'm canadian who want to understand capital gains tax rate.I have a rental house that i bought at 500K. I sold it after 9 yrs at 1100K. With the money, i bought a new house (will be my primary res… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,811 satisfied customers
I have bitcoin and I want to avoid the capital gains tax and
Hi I have bitcoin and I want to avoid the capital gains tax and dont want it to be ordinary income what should I Do … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,095 satisfied customers
What are the taxes rates 2016 for term gains in irrevocable
what are the taxes rates 2016 for long term gains in irrevocable trusts … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,095 satisfied customers
For capital gains tax can a payment plan be set up? I took
for capital gains tax can a payment plan be set up? … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,095 satisfied customers
I have a question regarding the ordinary income tax. If the
Hello, I have a question regarding the ordinary income tax. If the ordinary income tax due is negative does that apply anywhere? This pertains to the sale of an S corp .business. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
TAX RETURN: Health coverage exemptions I moved from Europe
TAX RETURN: Health coverage exemptions I moved from Europe to the US in mid-2015 and applied for a green card in oct based on marriage to a US citizen (which was granted to me in spring 2016). We are … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,811 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x