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What are the federal and Oregon state taxes on profit of…

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What are the federal...

What are the federal and Oregon state taxes on profit of sale of my home. My wife and I are age 81 and 77 respectively. I expect the profit will be about $400,000.

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The home is our primary residence, and we will sell it several years from now.

Submitted: 8 months ago.Category: Tax
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10/9/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 8 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,715
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

What you are referring to is the capital gains tax. In brief, if this is your primary residence, it is likely that you and your wife will qualify for the maximum exclusion on the sale price, which is $500,000. This is on the federal end. Let me first explain how capital gains works. If you sale the property for more than the cost basis(purchase price, improvements, and certain other costs), you incur a gain. If you sale the property for less than the cost basis, you incur a loss. Now that I have explained that, if you do incur a gain, in order to qualify for the maximum exclusion on the sale, you and your wife have to meet the following requirements:

Eligibility Step 2—Ownership Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.

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Eligibility Step 3—Residence Determine whether you meet the residence requirement. If your home was your residence for at least 24 of the months you owned the home during the 5 years leading up to the date of sale, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period. It doesn't have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period.

For more information regarding the sale of your home, you can refer to IRS Pub 523 at the following link.

https://www.irs.gov/pub/irs-pdf/p523.pdf

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If the home is not your primary residence, there is no exclusion on the sale amount.

I will get back with your shortly with the information for the state of Oregon.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 8 months ago

Hello again. The uppermost capital gains tax in Oregon is 9.9%. The federal rates are 15% and 20%. If capital gains applies to your situation, which again, may not because of the exclusion, the rate would be 20% (federal).

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A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. In Oregon, the uppermost capital gains tax rate was 9.9 percent.

REFERENCE SOURCE:

https://ballotpedia.org/Tax_policy_in_Oregon

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