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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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A Captial Gains Question: We are selling a house my wife

Customer Question

A Captial Gains Question: We are selling a house my wife purchased after a 1031 sale of real estate from a trust. The original cost basis from the 1983 trust for her share was $50,000. She purchased a house with through a 1031 exchange for $570,000 two years ago. We are looking to sell it at a net of $610,000. This year our gross income is less that $75000 and should be in the Fed tax bracket of 15%. I need help figuring the Federal and California State capital gains liability.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

I will provide a rough estimate.
Assuming you are filing a joint tax return - both below 65

regular income $75,000 plus

long term capital gain $610,000

Assuming - standard deduction - no dependents - no other deductions or credits

Adjusted Gross Income (AGI):$685,000

Standard Deduction:$12,600

Personal Exemptions:$0 - eliminated because of high AGI

Taxable Income $672,400

Regular Tax:$98,063

Alternative Minimum Tax:$23,574

Net Investment Tax:$16,530

Total estimated federal Tax liability $138,167

Please let me know if any assumption should be corrected.

Customer: replied 1 year ago.
Are Capital Gains added onto regular earnings for the AGI?Are the gains taxed at a different rate that earned income?Also, what then is the California tax liability?
Customer: replied 1 year ago.
Are you still there?
Expert:  Lev replied 1 year ago.

Are Capital Gains added onto regular earnings for the AGI?

Yes - capital gains are reported on form 1040 line 13 and are added to AGI.

Expert:  Lev replied 1 year ago.

Are the gains taxed at a different rate that earned income?

Yes - for long term capital gains (when assets are held more than a year.

We would need to use a special worksheet to calculate tax liability using lower tax rates.

Also, what then is the California tax liability?

California doesn't have reduced rate for long term capital gain - so regular tax rates would apply.

Based on above assumptions - your estimate CA state income tax liability is $ 60,700

As you likely itemize - that will reduce your tax liability.

So be sure to pay all deductible expenses before the year end.

Let me know if you plan any deductions - and I will help to verify how these will affect your expected tax liability.

Expert:  Lev replied 1 year ago.

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If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all tax related issues.