Capital gains

[ftzu001]

I bought a house ( principle residence ) in 1988 for $100,000

I spent $110,000 on improvements to the property

I sold the house for $900, 000

my exemption  ( single ) is $250, 000

my cost is $210, 000 total

my total net is $900,000-$250, 000-$260,000 =$410,000

my personal income ( retired ) is $35,000 

are the two added together or taxed separately ? 
thank you , 

[DawnC]

They are taxed separately.   Your retirement income is taxed as ordinary income and the house sale is a capital gain.    

Capital Gain Rates