Tax rate on 2nd home sale

[willoregon]

We sold a 2nd home in 2025, make less than $600,050 married filing jointly, including the proceeds from the sale, so I expected and planned on paying 15% tax on the gain, but the program is computing a 20% tax on the gain.  Just want to make sure the program is calculating it correctly?  I am sure it is but why 20% when from what I read it should be 15%? Thank you!

[Vanessa A · Accepted solution]

The $600,050 applies to all of your income.  So if your total taxable income with the sale of the home was greater than $600,050, then the amount above that would be taxed at the 20% rate instead of the 15% rate. The 20% rate only applies to the amount above $600,050.  Below that it would be taxed at 15% and 0% according to the brackets. 

If your MAGI is over $250,000, but your taxable income is below $600,050, then it is possible that you are seeing an effective tax rate on this of 18.8% instead of 20% due to the Net Investment Income tax of 3.8%.  This is based on your Modified Adjusted Gross Income. 

Was this home ever a rental?  If so, then you may also be seeing a tax on the recapture of depreciation which is 25% for real estate. 

Look at your Schedule D worksheet, Capital Gains and Qualified Dividends worksheet to see for sure how you are being taxed and the rates that are being applied.