Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

I have a question similar to the one I'm looking at. The MCC…

I have a question...

I have a question similar to the one I'm looking at. The MCC recapture tax and getting a $500K deduction from selling my primary residence. Can you help me with this?

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

I'm about to receive a capital gain of $310K from selling my primary residence. I'd like to file as married filling jointly to deduct the full $310K. BUT I have an MCC, and would owe $20K if my spouse's income counts as a "CO- MORTGAGOR". My spouse was never on the original mortgage, they came along later. I believe my spouse fits the requirements for '2 years of use' in the house, but I'd like to exclude their income for the 'CO- MORTGAGOR’S' on the MCC.

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

I'm in the 25% federal tax bracket and 9.3% tax bracket in California.

Show More
Show Less
Ask Your Own Tax Question
Answered in 4 minutes by:
3/12/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,017
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. My name’s Lane …

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

Ask Your Own Tax Question

If I understand your question, you're talking about a Mortgage credit Certificate and the exclusion of gain on primary residence from your federal tax return (which automatically exempts from the California return, as the starting point for California state income tax is the federal AGI)

...

Is that correct?

Ask Your Own Tax Question

OK, still don't so you coming into the chat here so let me lay the foundation.

...

First, the two MAY not be linked (unless your loan originator want's continual - ongoing - reporting of income from tax returns.

...

Second, (I may be stating the obvious here, but)

...

Capital gain = Sales Price - basis (where basis is purchase price plus improvements plus selling costs) so, just wanted to be sure you NEEDED all 500,000 of the capital gains exclusion.

...

MCC's vary by state. Can you tell me why you believe that filing jointly would be a problem - given that you're now be paying off the loan as part of the sale?

Ask Your Own Tax Question
Customer reply replied 1 month ago
Hi Lane, thx for getting back to me so quickly!
I’m in CA, and I bought my SF condo five years ago, and will need the cap gains exclusion of $310K, as I bought in at about 600 and it sold for 910k.
Customer reply replied 1 month ago
Filing jointly would potentially be a problem, as my wife and I together have an AGI that is high enough that we would be subject to recapture tax.
Customer reply replied 1 month ago
But if it’s just my AGI, then I don’t make enough money. And I definitely wouldn’t need to pay back the recapture tax. The recapture tax would be about $20k.

OK, lets look at the math.

...

Filing as married filing separately, you'd get a 250,000 exclusion meaning that you'd have to include 60,000 as a capital gain.

...

60,000 x .15 = 9000

...

I'd take the 9000 vs the 20,000 any day.

Ask Your Own Tax Question
Customer reply replied 1 month ago
But there’s a chance I won’t have to pay either 9000 or 20,000 right? If my wife isn’t considered a co-mortgagor for the MCC, then I can take the full 500k cap gains deduction and not have to pay the recapture tax. It feels like a $9000 question.

That's right. And that question I think only your state and/or the mortgage lender - who should be providing that kind of information - can answer.

...

My iunderstanding of the California MCC is that all three of the following events have to happen for Recapture Tax to apply:

...

1. You sell your home within 9 years of buying it; and

2. Your household income rises significantly over the life of the loan (generally more than 5% per year); and

3. You have a gain on the sale of your home

..

Also, the amount due will never exceed 50% of the gain on the sale or 6.25% of the original mortgage loan amount, whichever is less.

...

Now, with respect to this "co--mortgagor terminology, what I see inthe code is this, under the special rules (26 USC 143)

...

(B)Special rule where 2 or more persons hold interests in residence

Except as provided in subparagraph (C) and in regulations prescribed by the Secretary, if 2 or more persons hold interests in any residence and are jointly liable for the federally-subsidized indebtedness, the recapture amount shall be determined separately with respect to their respective interests in the residence.

...

(paragraph C related to transfers pursuant to a divorce so not relevant here)

Ask Your Own Tax Question

Question. WHo is on the title and who is on the loan? (two different issues)

Ask Your Own Tax Question
Customer reply replied 1 month ago
My name is ***** ***** thing on the title and loan.
Customer reply replied 1 month ago
I don’t think my wife holds interest in residence for the federally subsidized indebtness. She didn’t pay any monies toward the mortgage.

It's he ownership interest in the property that the federal code is referencing.

...

And if she's not obligated on the loan, the only rub I can see is their somehow assigning her income to the income testing.

...

She's NOT a co-mortgagor in andebor creditor law sense/

...

One more question; where did you get the terminology co-mortgagor. I can tell you that for purpose of debtor/creditor law under ANY common law state she is not considered a co-mortgagor.

Ask Your Own Tax Question
Customer reply replied 1 month ago
The term co-mortgagor came from the MCC recapture worksheet, which requires you to put the name of the mortgagor (me) and any co-mortgagors. This is from the SF Mayors office of Housing MCC worksheet.
Customer reply replied 1 month ago
Here's a URL to the worksheet, not sure if it will come through the chat: http://sfmohcd.org/sites/default/files/Recapture%20Notice%20and%20Computation%20Worksheet%20%28MCC%208%29%205.2017.pdf

Yes but she's not a co-mortgagor - not for federal tax purposes

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,017
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 1 month ago
great, thank you for your help, this was amazing!

Glad to help. Thanks for the rating.

Ask Your Own Tax Question
Was this answer helpful?
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,017
14,017 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane 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

1,338 satisfied customers

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

Richard

Richard

Tax Attorney

4,451 satisfied customers

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

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

56 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,124 satisfied customers

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

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 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.

< Previous | Next >

Related Tax Questions
If the spouse filed married filing separately and the
If the spouse filed married filing separately and the husband files an extension but did not file his tax return yet, can they amend to file married filing jointly? Does he has to file his tax return … read more
abci168
abci168
Principal
27 satisfied customers
I am doing the taxpayers return as Married Filing Separately
Second opinion] I am doing the taxpayers return as Married Filing Separately & he want to file Itemized Deductions on his return, his return is on Extension. However his wife already filed her return … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,080 satisfied customers
Question regarding my 2017 federal tax return what can i
Hello Question regarding my 2017 federal tax return what can i deduct from my refinance with cash out for home improvement… read more
Shan-Nel Simmons
Shan-Nel Simmons
Tax Professional/Owner
Master\u0027s Degree
43 satisfied customers
I am doing the taxpayers return as Married Filing Separately
I am doing the taxpayers return as Married Filing Separately & he want to file Itemized Deductions on his return, his return is on Extension. However his wife already filed her return Married Filing S… read more
Shan-Nel Simmons
Shan-Nel Simmons
Tax Professional/Owner
Master\u0027s Degree
43 satisfied customers
On line 17, Form 1120 ,C Corp Federal Tax return are state
On line 17, Form 1120 ,C Corp Federal Tax return are state corporate income taxes deductible.If I am doing my Federal C Corp returns for 2017 are the state corporate income taxes due but not paid yet … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
I filed my state and federal taxes electronically and then
I filed my state and federal taxes electronically and then realized that I accidentally omitted something that significantly changes my refund from the federal and my payment to the state. I need to f… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
I'm filing married filing separate and will submit form
I'm filing married filing separate and will submit form 8958. We have a marriage agreemtn … read more
abci168
abci168
Principal
27 satisfied customers
Finally filing 2016 income tax returns. Filing as "married
Finally filing 2016 income tax returns. Filing as "married filing separate return". Did not live with spouse at all in 2016. What is she on my return: an exemption? a dependent? an alimony expense onl… read more
abci168
abci168
Principal
27 satisfied customers
Question regarding Married Filing Separately in California -
Question regarding Married Filing Separately in California - Community Property state -Currently divorcing, wife or her tax person will not respond to me. Can I file my taxes as single since I cannot … read more
Lane
Lane
JD, CFP, MBA, CRPS
14,017 satisfied customers
According to federal income taxes rules, can a non-
According to federal income taxes rules, can a non- custodial parent fund a bank account with pre-tax dollars to pay child support … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Iowa Income Tax. Is 100% of capital gains on the sale of a
Iowa Income Tax. Is 100% of capital gains on the sale of a rental property deductible if the requirement is met for hours spent for management of the property? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
I have a capital gains taxation question, federal and state
I have a capital gains taxation question, federal and state of california … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
My Federal tax return was rejected because of EIN number for
My Federal tax return was rejected because of EIN number for my employer. How do I correct this error?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
Ready to mail off printed TurboTax 2017 Federal Tax Return
Ready to mail off printed TurboTax 2017 Federal Tax Return and instructions on what to mail state "Attach first copy or Copy B of Form(s) 1099 to the front of your Form 1040." I'm confused on what for… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
The new federal tax law doubles the amount of money that's
The new federal tax law doubles the amount of money that's automatically exempt from the federal estate tax -- to roughly $11 million of an estate for someone who was unmarried. The provision remains … read more
Lane
Lane
JD, CFP, MBA, CRPS
14,017 satisfied customers
Can I amend 2014 tax return to married filing separately
Can I amend 2014 tax return to married filing separately instead of filing joint return? We were legally separated in 14… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,080 satisfied customers
I received email stating that our 2017 federal tax return
I received email stating that our 2017 federal tax return prepared via TurboTax had been completed and filed and accepted by the IRS but no refund amount was stated therefore current refund amount and… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,954 satisfied customers
Are religious (church) non-profits required to file state
Are religious (church) non-profits required to file state and federal taxes annually? … read more
Lane
Lane
JD, CFP, MBA, CRPS
14,017 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