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Sell of property tax liability. Ca. Bought home 25 yrs ago…

Sell of property tax...

Sell of property tax liability

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Ca. Bought home 25 yrs ago put aproximently

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000

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Answered in 6 minutes by:
9/27/2017
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 57,234
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

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Good evening. Was this house your principal residence? Are you married? Thanks.

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Customer reply replied 10 months ago
married net income 105,000 does the profit push me into a higher tax bracket based on the sell I owe 800,000 re-financed to 875,000 put it all into remodel bought home 25 years ago receipts maybe a problem improvement obvious due documented
Customer reply replied 10 months ago
Not yet on phone
Customer reply replied 10 months ago
N/A
Customer reply replied 10 months ago
Are we done?

Thanks for following up. First, you will have gain equal to the selling price (less the closing) in excess of your basis. The bais would be the purchase price plus the cost of improvements. You only need about documenting the improvement cost is audited, which risk is extremely low. Then, under Section 121 of the Internal Revenue Code, you can exclude up to $500,000 of gain on the sale of your principal residence.

With respect to the remaining gain, in CA, you will be subject to tax up to 13.3%; you'll get credit for those taxes on your federal return. On the Federal level, the Federal tax laws concerning taxation of long term capital gains are as follows (and in determining the brackets, the capital gains are added to your other net taxable income:

0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,
15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and
20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket.

In addition, starting in 2013, capital gain income became subject to an additional 3.8% Medicare tax for taxpayers with income at or above a certain threshold. This 3.8% Medicare surtax applies to taxpayers with “net investment income” in excess of threshold income amounts of $200,000 for single filers and $250,000 for married couples filing jointly.

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I apologize for the phone call request. JA sends those out independently of the experts and we have no control over them. There's no need for you to pay for a phone call...we can easily resolve this in this thread. :)

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Customer reply replied 10 months ago
Thank you my question more specifically will the income from the sale push me into the 35%tax bracket or...do I stay at my present rate of 20 can I deduct what I owe including my remodel cost 500,000 I know don't understand interest deduction up to 1,mill

You're welcome. What you owe has no relevance in calculating your gain. Your gain is simply the sale price less basis. Your ordinary income marginal rate won't increase at all; rather, it's simply included in determining at what rate your long term capital gain on your sale is taxed.

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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 57,234
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Customer reply replied 10 months ago
Wow I'm looking at approx. 400,000 +sales tax (ca) plus med tax improvement Minuse 500,000 does that sound right

Unfortunately. :(

Thank you so much for the 5-star rating! I know rating takes an additional step and I truly appreciate you taking the extra time! It's been my honor and privilege to help you with this. If I can help you in any way in the future, I'll be happy to help. For easy access, my bookmark is: www.justanswer.com/law/expert-legalbeacon/ . Or, simply request “Richard only” in the first line of your question.

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