capital gains tax

[leslieostojich]

We are selling a secondary home that we purchased for my daughter and her family to live in during her husband's surgical residency.  Since is is a second home for us and not our primary residence, but was not used as a rental property, we want to know what percentage of the gains to set aside for capital gains taxes.  

[marctu]

So, the use of we in the question, makes me assume that the filing status would be married filing jointly.   The Long-term capital gains tax rates for the 2024 tax year are as follows:

FILING STATUS	0% RATE	15% RATE	20% RATE
Source: Internal Revenue Service
Single	Up to $47,025	$47,026 – $518,900	Over $518,900
Married filing jointly	Up to $94,050	$94,051 – $583,750	Over $583,750
Married filing separately	Up to $47,025	$47,026 – $291,850	Over $291,850
Head of household	Up to $63,000	$63,001 – $551,350	Over $551,350

In addition, those capital gains may be subject to the Net Investment Tax, an additional levy of 3.8 percent if the taxpayer’s income is above certain amounts. The income thresholds depend on the filer’s status.

(individual, married filing jointly, etc.) and are not adjusted for inflation.

The IRS statutory income thresholds are as follows (Based upon Modified Adjusted Gross Income):

• Married filing jointly — $250,000
• Married filing separately — $125,000
• Single or head of household — $200,000
• Qualifying widow(er) — $250,000

So, what you should set aside depends upon the entirety of your tax return.  Rather than setting aside I would suggest a third or fourth quarter estimated tax payment depending upon which quarter the sale takes place. 

Thanks again for the question  @leslieostojich 

All the best,

Marc 

Employee Tax Expert

[leslieostojich]

Does the information you posted, which indicates a 0% rate for my husband and I also apply to a secondary home, which is our situation, or just when selling our primary home?

[LenaH]

Yes. When selling your second home, you would be subject to capital gains tax on your profit. Long term rates (0%-20%) apply if you've owned the house for longer than a year. Your rate would be dependent on your income, as posted above by marctu. For the long term capital rate to be 0%, you can have taxable income of up to $94,050 if filing jointly. 

@leslieostojich