0% Captial Gain tax rate

[Clipperclerk]

My client is on a fixed income of less than 40k annually. She sold her house last year for a big gain above the primary residency exemption. Does she qualify for the 0% tax rate on long-term capital gain?

[IRonMaN]

What happens when you load it into the software?

[Clipperclerk]

It calculates a capital gains tax at the15% rate.

[sjrcpa]

But probably not all of it is taxed at 15%.

Look at the Schedule D Tax Computation worksheet. It is most likely correct.

[Clipperclerk]

Yes, You are correct a small portion is being taxed at 0%. But is there a reason why the entire gain is not at 0%?

[IRonMaN]

Income is too high

[Just-Lisa-Now-]

If shes on Social Security, dont forget to remind her that her Medicare Premiums will go up for 2023 due to this increase in income.

https://www.medicareresources.org/medicare-eligibility-and-enrollment/what-is-the-income-related-mon...

[TaxGuyBill · Accepted solution]

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@Clipperclerk wrote:

My client is on a fixed income of less than 40k annually.

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If she started off with $40,000 of income, and adds in a large amount of additional income from the sale, that puts her income much higher.  So if she had a $200,000 of taxable gain from the sale, her income is now $240,000.  That means much of the capital gains would be taxed at 15%.

[Clipperclerk]

Thank You all!  Makes Sense