@STPETEJACK - as few things
1) since the asset (house) is inheriited, it is always a long term gain, even if you sold it the day after the death of their mom.
2) my personal opinion, it is best to make investment decisisons based on their merits and not with the primary objective to reduce taxes - otherwise, it's the "tail wagging the dog"
3) for son #1, the student loan interest is not deductible because his adjusted gross income exceeds the threshhold of $85.0000. I can't tell you what the tax bill will be because I don't know how much is being withheld in his paycheck. I can tell you, look at the table I posted above, some of the capital gains will fall into the 0% tax bracket, and I suspect the blend of the part that falls into the 0% tax bracket and the 15% tax bracket should be around 12% of the $90,000. Contributing to an IRA will not impact his taxes because his employer offers a retirement plan (the 401k) and his income is otherwise too high with the capital gains included to deduct the IRA contribution on his tax return. He can still make the contribution, but it would not reduce his taxes.
4) for son #2, again, the student loan interest is not deductible because his adjusted gross income exceeds the threshhold of $85,000. The IRA contribution will NOT be deductible because his employer offers a retirement plan (the 401K) and because of the capital gains, son #2 makes too much money to be able to deduct the IRA contribution. He can still make the contribution to the IRA but it won't impact his taxes. Similar to son #1, look at the table I posted above, some of the capital gains will fall into the 0% tax bracket, and I suspect the blend of the part that falls into the 0% tax bracket and the 15% tax bracket should be around 10% of the $90,000. It's a little less for son #2 because his income is slightly lower, so there is more of the capital gain that would end up on the 0% capital gains tax bracket.
5) there will also be state income tax if you live in a state that has state income tax. For most states that is "ordinary" income - there is no separate tax bracket for capital gains.
does that help?
