Profit on home sale usually tax-free
Most home sellers don’t have to report the transaction to the IRS because the profit does not exceed $250,000 for single taxpayers or $500,000 for married taxpayers. However, if you’re one of the exceptions, knowing the rules will help you hold down your tax bill. TurboTax addresses some of the most common topics, concerns, pivot points, & solutions:
- Do I have to pay taxes on the profit I made selling my home?
- How do I qualify for this tax break?
- How do I qualify for a reduced exclusion?
- Deciding whether to take the exclusion
- Do I have to report the home sale on my return?
- Figuring the gain on the sale of a home
- What is the original cost of my home?
- What is the adjusted basis of my home?
- Postponed gains under the old “rollover” rules
- Converting a second home to a primary home
Use this calculator to estimate the capital gains taxes that would be due as a result of the sale of an asset (investment property or primary residence) held for more than one year. Federal (and Medicare) and CA State CAP GAINS tax rates are set forth at the bottom of this page. Although this overly simplified calculator will provide some insight, it is an approximation only. Note that this calculator assumes worse case / highest tax rates without application of any applicable §121 exemption; your results may differ. Do not rely on the results without the added / needed advice and guidance of a tax or legal professional. A complete analysis required substantially more details and nuance that contribute to a full financial, tax, estate planning, and legal analysis.
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To learn whether you have a gain or loss on the sale of your home, refer to:
For general information on the sale of your home, refer to:
- IRS Publication 523: Selling Your Home.
- Tax Topic 701: Sale of Your Home,
- IRS Publication 551 Cost / Adjusted / Other Basis.
- Topic No. 409 Capital Gains and Losses
- Application of 3.8% Net Investment Income Tax
The long-term Federal capital gains tax rate is either 0%, 15%, or 20% (assumed by calculator for worst case scenario) as of 2019, depending on this income schedule.
|Tax Rate:||Single Taxpayers||Married Filing Jointly||Heads of Household|
|0%||$0 – $39,375||$0 – $78,750||$0 – $52,570|
|15%||$39,376 – $434,550||$78,751 – $488,850||$52,571 – $461,700|
|20%||$434,551 or more||$488,851 or more||$461,701 or more|
Find out if the 3.8% Net Investment Income Tax applies to you
If an individual has income from investments, the individual may be subject to net investment income tax. Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.
The statutory threshold amounts are:
- Married filing jointly — $250,000,
- Married filing separately — $125,000,
- Single or head of household — $200,000, or
- Qualifying widow(er) with a child — $250,000.
In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.
Net investment income generally does not include wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income.
Additionally, net investment income does not include any gain on the sale of a personal residence that is excluded from gross income for regular income tax purposes. To the extent the gain is excluded from gross income for regular income tax purposes, it is not subject to the Net Investment Income Tax.
Because California does not give any tax breaks for capital gains, you could find yourself taxed at the highest marginal rate of 12.3% plus the 1% Mental Health Services tax (where income exceeds $1 MIL). This is maximum total of 13.3% in California state tax on your capital gains. It all depends on your tax bracket. Note that the calculator below is set at 12.3% and does not factor in the 1% Mental Health Services tax for those taxpayers annually earning more than $1,000,000.
Single or Married Filing Separately …
1.00 %: $0-$8,544
2.00 %: $8,545-$20,255
4.00 %: $20,256-$31,969
6.00 %: $31,970-$44,377
8.00 %: $44,378-$56,085
9.30 %: $56,086-$286,492
10.3 %: $286,493-$343,788
11.3 %: $343,789-$572,980
12.3 %: $572,981-$999,999
12.3 % + 1% Mental Health Services surtax where income is $1,000,000+