How to Calculate Capital Gains When Selling Real Estate (Part I)Below is a simple illustration of how a married couple would calculate their capital gains and taxes if they sold their primary home in California.  Primary Home:
Sales price$1,300,000
Closing costs from selling home  -$100,000
Adjusted sales price$1,200,000
Purchase price  $500,000
Closing costs from purchasing home    $10,000
Home improvements    $90,000
Adjusted cost basis:  $600,000
Capital gain ($1,200,000 – $600,000)  $600,000
Profit exclusion ($250K single, $500K married) -$500,000
Adjusted capital gain  $100,000
Depending on your income bracket, your combined Fed + CA tax rate will be between 25-35% which means on a $100,000 gain, your taxes will be $25,000 to $35,000. The federal tax rate on long-term capital gains is 15%, 18.8%, or 23.8%.  (There’s a 3.8% Obamacare investment tax if your income is over $250,000.)CA tax rate is 9.3% to 13.3%.  (CA does not have a lower long-term capital gains rate.)If you sell your primary home at a loss, you cannot deduct the loss.Closing costs include commissions, legal fees, title fees, recording fees, transfer taxes, etc. 2018 Capital Gains Tax Rates for Married Filing Jointly
Total taxable incomeFed long-term capital gains rateCA tax rate
Up to $77K0%1% to 6%
$77K to $250K15%6% to 9.3%
$250K to $479K18.8% (15% + 3.8%)9.3%
$479K and over23.8% (20% + 3.8%)9.3% to 13.3%
 Note: You don’t have just one “tax bracket” that all of your income gets taxed at.  You pay the marginal tax rate for the incomed earned within that bracket.
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