Calculating Capital Gains Tax?

Question

I am single. I bought a home in 1986 for about $96,000. I recently sold it for $405,000. During the years, I put a HELOC on the home and pulled $250,000. Will I be liable for any Capital Gains Tax? If so, on how much? Please explain how you came to the amounts.

Answer 1

What you took out on the HELOC has nothing to do with what you owe now,  Your basis is the original cost of $96K, plus any improvements, plus things like realtor's commission for selling it.  The sale price minus your basis, whatever that turns out to be, is your gain.  Assuming that you lived in the home as your main residence for two of the five years immediately before the sale, you'll owe capital gains tax on your gain minus $250K.

Answer 2

The HELOC does not figure into your taxes.

You bought the home for $96,000.  If you put any improvements into the home, such as a new kitchen, new roof, add those improvements.  The sum is the basis of your home (there are other additions and subtractions possible as well).

Ignoring any changes to the basis, your gain is the difference between the selling price (net of commissions) and $96,000.  So let's say $300,000.  If this is your principal residence, your taxable capital gain is $50,000.  You are exempt from $250,000 of your gain.

Depending on your tax bracket, the tax on this gain is at most $7,500, or 15%.  It is possible to pay less if your tax bracket is less than 25%.

Answer 3

Your cost of the house is $96,000 plus cost of improvement (if any) plus selling cost.

You can exclude gain of $250,000 if it qualifies to be your main home.

Read:  http://taxipay.blogspot.com/2008/03/prof...

Answer 4

Assuming that you meet all the tests for residency gain exclusion here goes-

Basis 96,000

FMV 405,000

Gain 309,000

Your recognizable gain for tax purposes will be 309,000 less the gain exclusion of 250,000. Cap Gain is 59,000.

Assuming that you are not subject to Alternative minimum tax, the cap gain tax should be 15% which is around 8,900. Selling costs will reduce the gain.

The HELOC has no effect on the gain or tax. It will of course reduce your net cash after tax.

Read the exclusion rules at this website.

http://taxes.about.com/od/taxplanning/qt...