Huge Tax Bill !!

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sks
Posts: 28
Joined: Thu Feb 05, 2015 12:59 am

Huge Tax Bill !!

Post by sks » Thu Mar 26, 2015 12:01 am

Hi All:

I sold a Flat (2nd home) in India for 150K with a gain of 100K not realizing the impact on tax. This put in a very high bracket $350K and I am not eligible for any deduction. TurboTax shows $7K federal tax and $6K for CA tax. Any suggestion on how to minimize tax here? My tax status is MFJ. Fortunately, it looks like I am able to claim credit for tax paid in India, otherwise federal tax bill would have $30K.

Thanks.

SK

Flashes1
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Joined: Wed May 07, 2008 7:43 am

Re: Huge Tax Bill !!

Post by Flashes1 » Thu Mar 26, 2015 7:10 am

A wise man once told me to never skimp on medical advise, legal advise......and tax advise. You may want to find a good tax guy. That's what wealthy people do.

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Rainier
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Re: Huge Tax Bill !!

Post by Rainier » Thu Mar 26, 2015 7:25 am

We all have to pay tax on income.

Are you sure the gain is $100k? Did you make improvements to reduce your gains?

Lynette
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Re: Huge Tax Bill !!

Post by Lynette » Thu Mar 26, 2015 7:29 am

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Last edited by Lynette on Tue Jan 08, 2019 7:39 pm, edited 1 time in total.

NightFall
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Re: Huge Tax Bill !!

Post by NightFall » Thu Mar 26, 2015 7:35 am

I assume that 13K is only on the extra 100K. This is really not bad... 7% federal is pretty low. However, there's not much to do for 2014 at this point. If it were still in 2014, you could max any deductible retirement accounts you may have that are not already maxed. At that income you are likely paying the additional medicare tax and investment income tax. Overall, 7% doesn't sound too bad.

UncleBen
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Re: Huge Tax Bill !!

Post by UncleBen » Thu Mar 26, 2015 7:49 am

sks wrote: Any suggestion on how to minimize tax here?
This question almost always needs to be asked before the taxable event.

Congratulations on your profitable real estate deal, and successfully high income :D .

niceguy7376
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Re: Huge Tax Bill !!

Post by niceguy7376 » Thu Mar 26, 2015 9:03 am

Did you list that house in your prev years tax returns? What is your current visa status in US? Even if you are a resident alien, US has been aggressive in requiring all tax payers to provide thier out of country income and properties in a different form on a yearly basis.

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Aptenodytes
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Re: Huge Tax Bill !!

Post by Aptenodytes » Thu Mar 26, 2015 9:21 am

I don't get what the big deal is. You jumped a tax bracket. There is no $350K tax bracket for married-filing-jointly, but perhaps you mean you jumped from the 28% to the 33% tax bracket. That's just 5 percentage points, and it only applies to the amount above $226,850.

Or perhaps you mean you jumped from 33% to 35% which is even more of a yawner.

The same event that triggered your "huge tax bill!!" of $13k also added $100k to your bank account, so you should be able to pay the tax.

cleosdad
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Re: Huge Tax Bill !!

Post by cleosdad » Thu Mar 26, 2015 9:36 am

Flashes1 wrote:A wise man once told me to never skimp on medical advise, legal advise......and tax advise. You may want to find a good tax guy. That's what wealthy people do.
How about advice?

nordlead
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Re: Huge Tax Bill !!

Post by nordlead » Thu Mar 26, 2015 9:41 am

Aptenodytes wrote:The same event that triggered your "huge tax bill!!" of $13k also added $100k to your bank account, so you should be able to pay the tax.
Yeah... I know quite a few people who did stuff like this but didn't think of the tax consequences. So, they had $0 added to the bank account because they spent it all, which makes the increased tax bill seem huge.

sk.dolcevita
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Re: Huge Tax Bill !!

Post by sk.dolcevita » Thu Mar 26, 2015 10:17 am

niceguy7376 wrote:Did you list that house in your prev years tax returns? What is your current visa status in US? Even if you are a resident alien, US has been aggressive in requiring all tax payers to provide thier out of country income and properties in a different form on a yearly basis.
Real estate is not required to be reportable under FATCA or FBAR rules. But if OP had a bank account where he parked his sale proceeds, that account would need to be reported.

OP, it is too late to do anything for saving on 2014 taxes. Except perhaps contributing to an IRA if your income allows it. However, do make sure you report your bank accounts in India - the penalties for not doing so are very very harsh.

Topic Author
sks
Posts: 28
Joined: Thu Feb 05, 2015 12:59 am

Re: Huge Tax Bill !!

Post by sks » Tue Apr 28, 2015 9:26 pm

Sorry I could not respond sooner as I forgot to check "Notify me when a reply is posted". Thanks for all your comments.

I am all for paying taxes but the problem was that even though I sold property in India, funds were sitting in India waiting to be repatriated, hence felt the pinch :-)

I did learn the backdoor Roth IRA option which I was not aware earlier so atleast I can go with this option for this year as I am not eligible for Roth IRA.
But if OP had a bank account where he parked his sale proceeds, that account would need to be reported.
Yes, I have been filing FBAR every year.

Thanks.

SK

Gill
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Re: Huge Tax Bill !!

Post by Gill » Wed Apr 29, 2015 5:15 am

cleosdad wrote:
Flashes1 wrote:A wise man once told me to never skimp on medical advise, legal advise......and tax advise. You may want to find a good tax guy. That's what wealthy people do.
How about advice?
The wise man never told him that. :happy
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

spectec
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Re: Huge Tax Bill !!

Post by spectec » Wed Apr 29, 2015 6:58 am

sks wrote:Sorry I could not respond sooner as I forgot to check "Notify me when a reply is posted". Thanks for all your comments.

I am all for paying taxes but the problem was that even though I sold property in India, funds were sitting in India waiting to be repatriated, hence felt the pinch :-)

I did learn the backdoor Roth IRA option which I was not aware earlier so atleast I can go with this option for this year as I am not eligible for Roth IRA.
But if OP had a bank account where he parked his sale proceeds, that account would need to be reported.
Yes, I have been filing FBAR every year.

Thanks.

SK
Not only are you reqauired to do the FBAR reporting (by June 30), but you are probably ov er the amount required to include form 8938 with your income tax return as well. These are two separate reportings with different threshholds.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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