capital gain on primary residence

[jvarnercpa]

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?

[rbynaker · Accepted solution]

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.

[jvarnercpa]

Thank you for answering so quickly.  I can move on and give the client the bad news.

[rbynaker]

You mean something like "Congratulations on the huge gain on your property!  Out of the $900K profit you only have to pay ~$60K in federal income taxes."

[BobKamman]

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.  

[jvarnercpa]

Yes, they are.