@Saving CG Tax wrote:
The capital gains are on the sale of a long term rental house. The loss will be the result of another long term rental house.
We are retired and our taxable income averages $60,000. Does the $200,000 capital gain get counted as earned income in determining the tax bracket for capital gains which would result in $260,000 earned income?
Yes, the gains count as income for determining the tax rate. This is how it works. (This is simplified and the numbers are approximate).
Let's assume that by $60,000 of "taxable income" you mean your income after your standard deduction. For married filing jointly, that places you in the 12% income tax bracket and zero percent capital gains tax bracket. The 22% income tax bracket (and the 15% long term cap gains bracket) starts at $89,500. That means that the first $29,500 of the long term gain will be taxed at zero percent, and the remaining $170,000 will be taxed at 15%.
If you could delay the sale of the first house, or accelerate the sale of the second house, into the same tax year, then the loss would offset the gain. If not, the $50,000 loss in 2024 can be used to offset any additional gains from 2024, plus $3000, and you can continued to deduct $3000 per year going forward until you use up the loss.
