I am noticing a deficiency in Turbo Tax for a particular situation that is very common.
I sold my primary residence THIS YEAR (2024), and just finished my 2023 taxes using TurboTax Premier. I have not submitted yet because I want to make sure I get the right amount for my 2024 first quarter estimated taxes.
At the very end there is a section of dialogue, which does not include the obvious questions: "Do you expect to or have you already sold your primary residence in the current year?" This is a big question. I did sell, and will have a huge jump in capital gains. But Capital gains from something like a home, can be huge, and yes there is a huge exclusion Federal, of up to $500,000 for married filing jointly or $250,000 for married filing single. That said the cap. gains taxes are applied after all the other taxes are calculated, and are based on AGI. So as a retiree, I have control over my AGI somewhat because I can take a non-required distribution (after required ones of course) which Does affect my AGI. The capital gains on the house does not change my overall tax bracket nor does it change my AGI. And to make it even more complicated there is a whole different set of tax brackets for capital gains.
The first table below are the Fed Tax Brackets (applied to AGI , not Capital Gains, which are done seperately after Tax Due is calculated:
| | 2023 Federal Tax Brackets | | | | | |
| | Tax Rate | Single filers | Married filing jointly or qualifying surviving spouse | Married filing separately | | |
| | | | | | | |
| | surviving spouse | Married filing | | | | |
| | separately | | | | | |
| | 10% | $0 to $11,000 | $0 to $22,000 | $0 to $11,000 | $0 to $15,700 | |
| | 12% | $11,001 to $44,725 | $22,001 to $89,450 | $11,001 to $44,725 | | |
| | 22% | $44,726 to $95,375 | $89,451 to $190,750 | $44,726 to $95,375 | | |
| | 24% | $95,376 to $182,100 | $190,751 to $364,200 | $95,376 to $182,100 | | |
Here are the tax brackets for Capital Gains (After adjusting for the $250k-$500k exclusion for sale of a primary residence!)
| |
$0 to $80,000 ($80,800 in 2021) | |
$80,001 to $496,600 ($501,600 in 2021) | |
- Over $496,601 ($501,601 in 2021) | |
You would think the TurboTax estimated tax calculator would have this situation covered. But no -- Tax Planning HA ! good luck, and go look for an expert because Intuit is not that intelligent, or intuitive!
Could any of you fellow community members who know this situation tell me how to plan it? I have a spreadsheet that is working for me which could share, but its my belief that TurboTax needs to add the logic for this situation and others like it.
