Q. What is the tax rate to be applied to the gain given their income level for the tax year (combined gross income of $30,000 not including the capital gain)?
A. The federal long term capital gains rate is 0% on taxable income in the first bracket, then 15% up to the next bracket. At $30K other income and using the standard deduction (under 65), for 2023, the first $57,550 of the excess gain (above the $500K exclusion amount) will not be taxed (actually taxed at 0%). The rest will be taxed at 15% (the 20% rate will kick in at $517,200).
California allows the same home sale exclusion ($500K) as the feds. But, the excess is taxed at ordinary income rates (no 0%).
