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Old 08-08-2015, 12:36 PM   #41
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I'm not looking at 20 percent for California. I live in California and the top rate used to be 9.3 percent, but I believe it was raised a couple of years ago.


What's confusing is how the federal tax rate on capital gains is computed. For example, if you are in the 15 percent federal tax bracket, your capital gain tax rate is zero, unless the gain pushes you out of the 15 percent bracket (income plus gain exceeds the 15 percent bracket limit). My question is if the gain pushes you into the top bracket, does the federal tax on the capital gain go to 20 percent, and does the Medicare surtax kick in?
Another Reader, All capital gains show up on Line 13 of Form 1040. And tax is calculated on Line 44 based on your taxable income. So if that takes you in the top bracket, you will pay the 20%. And likely the 3.8% on Medicare surtax.
This is the Qualified Dividend and Capital Gains tax worksheet that walks you through how the final tax is calculated.
http://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page43
You might find it easier to use TaxCaster or some free online tax software/calculator to play with the scenarios and see how tax changes. Do note, you are not paying the higher medicare surtax on the entire gain (not a cliff) but only on the amounts exceeding the 250K of MAGI. Same with capital gains tax rate. If you put 200K gain (no other income) vs say 300K gain vs 400K gain, you will see the increase in taxes using TaxCaster.

Sorry Kaneohe...this time you beat me to it
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Old 08-08-2015, 12:40 PM   #42
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Yes, but like kaneohe says, not all of it is taxed at 20%, just the part over the top.
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Old 08-08-2015, 04:44 PM   #43
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As you can see selling a house in your situation needs a plan to take advantage of property tax exemptions and accurately calculate your basis. IMHO you should visit an accountant who does individual tax returns in your community. Plan on two visits at a minimum, one to find out what information you will need and how to get it, another once you have the data to put together a spreadsheet. You need to determine where you want to live once you sell your home and see if you can preserve your property tax exemption status.

Next invite a couple Realtors to look at your house and ask each to prepare sales plans. Ask each to provide a list of homes comparable to yours that have sold for what $ in the last year, not only price but condition. Visit those addresses to see what the new owners have done with the property (in my DD's SV neighborhood many are torn down, others essentially a major remodel). Visit homes for sale in your neighborhood to compare them to your own. Ask for a list of homes that have been on the market more than 60 days and ask each Realtor why.

Frankly I think you should list with a discount realtor such as RedFin. In the SV no buyer is going to be turned off by a discount listing. Ask about their experience handling bidding wars.

When DD purchased her house the seller had the results of a professionally prepared inspection. It was a no contingency offering. Essentially buy as-is or don't waste my time.

The home she sold was offered that way as well, it would have been a starter home when I was married in the late 60s.. one of those split levels with the bedrooms over the garage in Sunnyvale.

Personally I wouldn't put a dime into a SV house without testing the as-is market first.
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Old 08-08-2015, 05:12 PM   #44
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+1 for Brat's comments. My neighborhood was built in the late 80's/early 90's. There have been two recent sales in the subdivision at $1.2 and $1.3MM, both from the original phases. Both houses are being gutted and completely renovated.


At $700k, I'm thinking older neighborhood and small house. If your schools are desirable, someone will come in and redo the house. The only caveat is the market has slowed somewhat because of the turmoil in the Chinese stock market.


I would not do anything until I had talked to a knowledgeable accountant and walked through the scenarios, as Brat suggests. If you want to stay in California and buy down in price, there are eight counties that will accept base year value transfers from other counties under Prop 90. You could stay in your home county and transfer your base year value if you can find anything less expensive that you like here. Preserving your low property taxes may give you better choices of places to live.


Get a couple of the top listing agents in your area to do what Brat suggests. The market is very different than even a few years ago and it's important to understand how the market works today.
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Selling a home and taxes
Old 08-08-2015, 05:44 PM   #45
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Selling a home and taxes

Quote:
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+1 for Brat's comments.

If you want to stay in California and buy down in price, there are eight counties that will accept base year value transfers from other counties under Prop 90. You could stay in your home county and transfer your base year value if you can find anything less expensive that you like here. Preserving your low property taxes may give you better choices of places to live.


.
+2

As of Nov. 2014, there were 10 counties. Check out Prop 90 on
boe.ca.gov.

Riverside County rejoined the group, and San Bernardino has been added to the list.


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Old 08-08-2015, 05:49 PM   #46
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I'm behind the times! That's what happens when you retire. Since it's generally considered to be a loss of revenue for the counties, I'm surprised. It never occurred to me to check for new additions.
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Old 08-08-2015, 05:58 PM   #47
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Tax wise there is an advantage in 'remodeling' a house in these counties. I won't bore all of you with the details but when DD purchased her home in SV DH made a renovation plan that kept the SQ Ft marginally the same as the existing residence (which included a caregiver residence) and retained the STRUCTURE of a substantial portion of the original residence EXCEPT FOR THAT WHICH NEEDED REPLACEMENT TO MEET EARTHQUAKE CODES. When SIL looked at their property tax basis after all that was done he about fell off his chair. There is an art to meeting DD's to- do-list, building codes, and taxing authorities.

None of their new neighbors had a skilled Architect father so they cleared the property and hoped for the best. Odds are the OP's buyer will do the same.
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Old 08-08-2015, 06:05 PM   #48
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Yep. What constitutes assessable new construction is a gray area when the square footage, building footprint and envelope don't change. Meeting some codes is exempt new construction and the "substantial equivalent of new" test is difficult to meet. Most assessors prefer to call remodels repair and replacement for that reason.
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Old 08-08-2015, 10:10 PM   #49
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I'm behind the times! That's what happens when you retire. Since it's generally considered to be a loss of revenue for the counties, I'm surprised. It never occurred to me to check for new additions.

San Bernardino has been added within the past year or so.

With respect to San B and Riverside counties, I wonder whether they were hit so hard with the downturn that retirees' prop tax transfers are better than nothing?


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Old 08-08-2015, 10:17 PM   #50
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Selling a home and taxes

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