IF the house that you are selling is your primary home, and you have owned it for more than a year, you will not have to pay any tax on the gain if your taxable income, including the gain on the house, is $44,625 or less (for 2023).
Using your figures, your basis for the house is $485,000 plus $140,000 of improvements, which comes to $625,000. So your capital gain is $900,000 - $625,000 = $275,000. If the $35,000 is a broker's commission, that's a selling expense which reduces your gain to $240,000. If you have owned and lived in the house for at least 2 out of the last 5 years before you sell it, you would probably qualify for an exclusion of gain up to $250,000. That means you can exclude the entire gain from your taxable income, regardless of how much other income you have. So you don't have to pay tax on any of the gain from selling the house, and the rates on long-term capital gain don't even come into the picture.
Moving expenses, mortgage interest, and medical expenses do not affect the amount of gain on the sale of the house.
TurboTax will figure this all out for you.
