@Podestam wrote:
My annual income is $30,000. I have a rental home I purchased many years ago for $500,000, I sell it for $1M. Does this sale now make my total income $530,000 which put me in to the 20% Capital gains tax bracket? Which would require me to pay $100,000 in taxes on the sale of my home ($500,000 profit x 20%)?
For best results, enter your estimated information into a 'mock' tax return. There are A LOT of variables.
But in a nutshell, that $500,000 is taxed at UP TO 20%. Part will be taxed at 0%, much of it will be taxed at 15%. Some will be taxed at 20%.
BUT there is more. You will also owe tax on the gain due to the depreciation that you took (or should have taken). That is taxed at your regular tax rate, up to 25%.
And still more ... part of the gain will be subject to the 3.8% Net Investment Income Tax.
And all of this 'extra' income could reduce (or eliminate) some other credits and deductions that you may usually qualify for.
Plus any State taxes.
Again, there are many variables. For best results, create a 'mock' account/tax return and enter all of your estimated information. The CD/downloaded version is easiest to try out various scenarios (plus it is just better than the online version anyways).
