Can A $50,000 lump sum back payment for SSDI force my long term capital gains rate from the sale of my home up to 15% instead of 0%? i’m sick and need to move to a condo

[jennifer-frericks]

I now get about $3500/mo ssdi. I file Head of Household. The house is listed at $850k and i bought in 2016 for $450k.

[rjs]

Yes, the lump-sum Social Security payment could possibly push some or all of your gain on the sale of the house into the 15% bracket. The long-term capital gain is "stacked" on top of your taxable ordinary income when calculating the tax on the gain. The gain is not necessarily all taxed at the same rate. It's possible that some of the gain will fall in the 0% bracket and some in the 15% bracket.

The calculations are very complicated. The results will depend on a number of factors, and there are complicated interactions between the various factors. Among the factors that could be involved are the lump-sum election for the back payment of Social Security, which might help, and the Section 121 exclusion of gain on the sale of your home. The best way to see what might happen would be to do a trial tax return. If you do that, do not use the TurboTax Online account that you used for your actual tax return. You don't want to make changes to the tax return that you filed.

[NCperson]

@jennifer-frericks no it doesn't.  Some of you gain would be taxed at zero and some would be taxed at 15% whether or not you had the $50,000 lump sum payment from SSI.  So the $50,000 will not "force" you into the 15% tax bracket; you are already there with a $150,000 gain (after the $250,000 exclusion), even if there was no $50,000 lump sum. 

The issue is just how much of the gain gets "pushed" into the 15% tax bracket from the 0% tax bracket. 

Also, were you married when you purchased the condo?  whether you divorced or your spouse passed can impact the cost basis and therefore, the capital gains.  if either occurred, can you explain more? 

[Mike9241]

also, if this is your principal residence and you lived in and owned it for 2 years prior to the date of sale and you are not married you would be entitled to a home sale exclusion of $250,000. so the taxable gain would be about $150,000 less any selling expenses.