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How do I calculate long term capitol gains on a rental property for a low income senior?

She 86 years old and is low income (about $15,000 gross income per year on average). She bought the property about 60 years ago, but has not lived in the property herself in the past 15-20 years and has been renting it. Selling this home has provided at least $200,000 in capitol gains.  I was reading low income individuals with long term capitol gains do not have to pay income tax on the gains. However, does she have to include the sale of the property as income for 2016? If so, it will push her in a MUCH higher bracket for that year. 

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How do I calculate long term capitol gains on a rental property for a low income senior?

Low income individuals do escape from paying capital gains tax but she will not be a low-income person in the year she sells this property.  

Also note that this property does not qualify as her personal residence because she has not lived in it for 2 out of the past 5 years.  However, if she were to move back into it for 2 years she would get a $250,000 exemption.  But she would still have to pay tax at a 25 percent rate (plus the state income tax) on the depreciation she has taken while the property was rented out.  

Yes, she definitely has a problem if she sells the property.  I she keeps it her heirs would inherit it at a stepped-up cost basis and would avoid paying any federal and state taxes.

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New Member

How do I calculate long term capitol gains on a rental property for a low income senior?

Low income individuals do escape from paying capital gains tax but she will not be a low-income person in the year she sells this property.  

Also note that this property does not qualify as her personal residence because she has not lived in it for 2 out of the past 5 years.  However, if she were to move back into it for 2 years she would get a $250,000 exemption.  But she would still have to pay tax at a 25 percent rate (plus the state income tax) on the depreciation she has taken while the property was rented out.  

Yes, she definitely has a problem if she sells the property.  I she keeps it her heirs would inherit it at a stepped-up cost basis and would avoid paying any federal and state taxes.

View solution in original post

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How do I calculate long term capitol gains on a rental property for a low income senior?

Thank you for the reply. This is what I feared. Unfortunately her son made her sell it in 2016 so that has already happened.
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How do I calculate long term capitol gains on a rental property for a low income senior?

Well her idiot son just lost a lot of inheritance money.