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After the $500,000 exclusion, my client has a long-term gain on the sale of their home greater than $400,000. I thought that the capital gain tax rate would be calculated based on all of their other income which is less than $80,000. Apparently I was wrong?
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It works similar to regular income tax but with different rates and brackets. Follow the Sch D worksheet and you'll see the portion taxed at 0%, 15%, etc.
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Thank you for answering so quickly. I can move on and give the client the bad news.
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Are they also paying NIIT on Form 8960? I was researching that for sale of a second home -- somehow got the impression that the rule might be different for primary residence. But that might be just for the exclusion amount.
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Yes, they are.
