@Angelchase wrote:
If the sale is treated like normal capital gains, if she files "Married Filing Separately", and her income is 0, then is it true that she should not have to pay any capital gains taxes?
No, it's not true, because her income is not zero. The tax bracket for the long-term capital gain is determined by her taxable income including the capital gain. So even if she has no other income, her taxable income will be almost the entire gain on the sale of the land. If she files separately, only the first $40,400 (for 2021) or $41,675 (for 2022) will fall in the 0% bracket. Any gain over that amount will be taxed at 15%. Also, her AGI will probably be over $125,000 (for filing separately), which means she will pay an additional 3.8% of net investment income tax on the amount by which her AGI exceeds $125,000. The gain on the farm land is considered investment income for the net investment income tax.
The thresholds for the 15% bracket for long-term capital gain, and for the net investment income tax, are higher for married filing jointly. So that's one possible reason that filing jointly might work out better. As others have suggested, you have to do the math.
