How to estimate Capital Gains on Home Sale in 2019

[skohl]

Hi,

I am trying to estimate what I will net from the sale of my home that my husband and I have lived in for over 10 years. I've researched this on the internet and I'm confused about what tax tables I use to determine the tax rate. Here's an example using fictional numbers for some of it:

• Paid $850,000 for house
• House sale estimate is $2,000,000
• We qualify for $500,000 capital gains exclusion
• Cost of selling is: 100,000 in commissions + Fees during closing of home sale: 10,000
• Improvements to house: 50,000 so far + Improvements to get ready for selling: 20,000
• Our income for 2019 will be $50,000 (real number)

I assume Cost Basis is 850,000+50000+20000=920,000  Correct?

Net proceeds from sale would be: 2,000,000-100,000-10000=$1,800,000 Correct?

So, do I take 1,800,000 -  920,000- 500,000 (exclusion) = 380,000 my taxable capital gain, correct? 

The final question: So, Is my ordinary income going to be taxed at 12% as defined in the 2019 tax tables and the 380K taxed at 15% per 2019 long term capital gain tables or are the two amounts combined?  Is it that simple?

Thanks in advance for any help.

[Carl]

You just need to read https://www.irs.gov/newsroom/helpful-facts-to-know-about-capital-gains-and-losses as that seems to put it into more of a plain language easier to understand.

It states The maximum tax rate on a net capital gain is 20 percent, but for most taxpayers a zero percent or 15 percent rate will apply. In addition, capital gains may be subject to the net investment income tax of 3.8 percent when income is above certain amounts.

There's other information that will apply to you also.

[skohl]

Hi Carl,

Thanks for your response. This is a high level explanation, which I understand. But when you start doing the math, questions arise about exactly how to compute the capital gains. For instance is the first $78K of capital gains taxed at zero? I've seen tax brackets that seem to say that.  Are all of the capital gains added to ordinary income to come up with MAGI?  I'm trying to figure out exactly what the NIIT tax will be.

[NCperson]

you are on the right track.  The capital gain you calculate is ALL going to be at 15%, unless your ordinalry income exceeds $400,000 (at which point the capital gains tax is 20%).

Also, you may have to pay the 3.8% additional tax (NIIT) if you ordinary income exceeds $250,000. it's not only going to impact the capital gains but any 'qualifying dividends' 

just put the information you provided into Turbo Tax . it'll handle it.