House sale in 2024: Capital Gain?

[thepinkmonkey]

Hi all-back again with a new question: it looks like I will need to sell my home in 2024. I am 72 and will have AGI below $47,025. Like with a LTCG stock sale, will the house sale be exempt from a CG tax because my income is less than the $47,025?

Thanks to all you smart tax pros,

TPM

[xmasbaby0]

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

[Bsch4477]

You may take an exclusion from capital gains (250,000/500,000) if you owned and used the home for at least 2 out of 5 years so you might not have any substantial capital gain. Your AGI is low but remember that any capital gains that you are subject to is added to your AGI. 

[Opus 17]

No, your entire gain is not tax-free, because the amount of the gain is also income for determining the tax rate on the long term gain.  Here’s how it works. 

I  will suppose you are single.  The long term rate is zero up to a taxable income of $47,150, and your standard deduction will be $16,550 (2024 numbers).   Let’s assume your taxable income without the house is $30,000.  That means that the first $250,000 of gain is excluded from your income.  The next $33,700 has a zero rate ($47,150+$16,550), and anything over that has a 15% rate.  

[thepinkmonkey]

Thanks to both of you, Opus 17 and Bsch 4477!

So, if I understand both of you, I (a single guy) can realize a maximum gain of $250,000 ( my actual gain will be much less than this) and not have to pay any LTCG?

Happy holidays,

TPM

[Opus 17]

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@thepinkmonkey wrote:

Thanks to both of you, Opus 17 and Bsch 4477!

So, if I understand both of you, I (a single guy) can realize a maximum gain of $250,000 ( my actual gain will be much less than this) and not have to pay any LTCG?

Happy holidays,

TPM

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Yes, probably.   See publication 523.

https://www.irs.gov/pub/irs-pdf/p523.pdf

As long as you have owned the home for at least two years, and lived in it as your main home for at least 2 of the past 5 years prior to the date of sale (that means 731 days, the days do not have to be consecutive), then you can exclude the first $250,000 of gain from your income (it is simply not counted as income).  There are some exceptions and extensions to the 2 year/5 year rule for military service, divorce, death of a spouse, of if you have to move out after owning for less than 2 years due to certain financial hardships.  

However, if you ever used the home for business (including the home office deduction) or as a rental, you must repay (recapture) any depreciation you claimed or could have claimed.  If you ever took a casualty loss deduction (such as for storm damage), you must repay that deduction too.  And, there is a very important exception in the law called "non-qualified use" if you ever rented the home as a landlord and then moved back into the home as your personal home.

If the home was not your main home, then you owe normal capital gains like selling any other asset.  The exclusion only applies to your main home.  

[thepinkmonkey]

That's great! 

Thank you, thank you, thank you!!!