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replied 5 years ago.
Is this your primary home that you will be selling?
Merlo. Accountant replied 5 years ago.
Hello again mercy,
First, I would like to address your question about not paying any capital gains tax if you are in the 15% tax bracket. That is not really how it works.
What the law allows you to do is exclude a portion of any capital gains you have from tax if your regular income is in the 15% tax bracket, but by no means does it allow you to exclude the entire gain once it reaches a certain point.
Here is an example of how this works. Let's assume that you are a single taxpayer. For the year 2009, a single taxpayer can have taxable income of up to $33,950 and still be in the 15% tax bracket. Once his taxable income exceeds that amount, he goes to the next highest bracket of 25%. If your regular income (not capital gains) was only $25,000 for the year,
that means you could have another $8,950 in regular income before jumping to the next highest bracket. So what the law allows you to do is use that $8,950 as an exclusion from any capital gains you have, and that portion only qualifies to be taxed at zero percent. But any capital gains you have over that amount will still be taxed at 15%.
Since the property you are thinking of selling is also used as your primary residence, you would be allowed to exclude $250,000 from the gain (or $500,000 if you are married filing a joint return), on the portion of the home that was used as your primary residence. So it could end up that at least on the portion of the sale that pertains to the unit you live in, you may not owe any tax at all after the exclusion is applied. But on the part that is used as rental property, the only part that you could exclude from capital gains tax would have to be calculated as in the example I gave you.
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