Capital Gains Taxes Above 250k
So I'm about to sell my primary residence, if the profit is roughly 450,000, and I am eligible for $250,000 capital gains exemption, it means that I will be paying capital gains on the remaining $200,000.
My question is this: in this scenario does that mean the first $250,000 counts as income which puts me into the tax bracket for 20% capital gains? Which means anytime someone takes the $250,000 exemption, any remaining capital gains would always be 20%?
Am I missing something here?
Most Popular Reply
Hi, Matt! Just to clarify, the gain on your property is the selling price of the home minus your cost basis and selling costs.
In a simple scenario, let's say you had bought your house for $200,000 and incurred no selling costs. You sold the home for $650,000. Under this scenario you'd have a gain of $450,000 ($650k - $200k). I wanted to clarify that because some believe the whole selling price is the gain.
Continuing with this example, you would then subtract the $250k exclusion (or $500k if you're married) from your $450 gain. Leaving you with a $200k capital gain. This $200k is ultimately what flows through to your page 1/2 of your 1040. It flows through via Schedule D as this is capital gain. This whole calculation is completed on Form 8949 and your Schedule D.
Hope this helps!