Capital gains question

[WhiskyDave]

I was condsidering selling my primary residence that will generate about 500k in profit, and as I'm married, I thought I would not have any capital gains liabilities, but I think that may not be case as my income is also included in the calculation correct?

(My income is around 200K for the year.- For referene)

If that's the case, and I'm retiring early in August, should I wait until next year to sell when I dont have any income? or am I not fully understanding what I read?

Thanks!

 

[Dash man]

There is a $500k exemption on capital gains from the sale of your primary residence, not on your total income. You should be good.

 

[WhiskyDave]

Thanks DM...But, I had read all income is rolled up to be included in capital gains calc, so it would 700K in my case ,and I would have relief for the 500k exemptiuon, but not the other 200K?

I would still have to pay the capital gains on the 200k?

 

[RobbieB]

No, earned income is not cap gains.

 

[pb4uski]

Thanks DM...But, I had read all income is rolled up to be included in capital gains calc, so it would 700K in my case ,and I would have relief for the 500k exemptiuon, but not the other 200K?

I would still have to pay the capital gains on the 200k?

No, how it works is that you calculate the gain on the sale of your home (sales price less commissions and selling expenses less amount paid less cost of improvements)... and then reduce that gain by up to $500k.... so from what you wrote your gain on the sale of your principal residence would be $0 after applying the exclusion and that $0 would be added to your $200k of income.

If you used TurboTax to do your tax return then open it oup and look at the What-If worksheet .

 

[donheff]

No, how it works is that you calculate the gain on the sale of your home (sales price less commissions and selling expenses less amount paid less cost of improvements)... and then reduce that gain by up to $500k.... so from what you wrote your gain on the sale of your principal residence would be $0 after applying the exclusion and that $0 would be added to your $200k of income.

If you used TurboTax to do your tax return then open it up and look at the What-If worksheet .

Or use TT or any free online tax program to rerun your 2021 tax with the house sale data plugged in.

 

[COcheesehead]

Dinkytown has a good 1040 estimater.
https://www.dinkytown.net/java/1040-tax-calculator.html

 

[pb4uski]

And then there is this: Publication 523 (2021), Selling Your Home