Attn Tax Experts: Sold Primary Residence

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colddeadfish
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Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 8:39 pm

Dear BH,

I have used the search feature, read previous questions and reply’s and read the tax code/worksheet.

I am still unclear about what to expect for tax year 2019. (I know! It’s early! But this is potentially a big hit for me and I want to plan!)

Sold house 1/8/19 for $380,000

After selling expenses, paying off mortgage etc. the potential 1099 will be ~ $300,000

I will also have ~ $25,000 of provable/deductible capital improvements (how far does this go back? All the way to purchase?).

I bought the house for $148,000 in 2001 (17 years)

So:

300,000 - $25,000 - $148,000 = $127,000 in capital gains. As an individual I won’t pay capital gains on this equity because it is less than $250,000 correct?

But:

I will pay income tax and/or be penalized (not qualifying for ACA subsidies) on this for 2019?

Since the equity is not ‘earned’ income is it taxed differently?

Can I use the standard ($12,000)/itemized deductions and TLH (only $3,000 a year) to further bring this amount down similar to earned income?
Am I thinking about this/understanding correctly?

Additionally, I will use all of this equity for a new home purchase in a few months. Do I get any income tax break for reinvesting this (almost) immediately back into a primary residence?

Currently self-employed and in the 12% tax bracket.

Thanks!
CDF
P.S. Clearly I will need a tax professional to help me. Any advice is appreciated.

Gill
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Re: Attn Tax Experts: Sold Primary Residence

Post by Gill » Wed Jan 09, 2019 9:09 pm

Are you married? That determines the amount of the exemption. In any case, your gain is less than the exemption for a single taxpayer so you have no tax problem at all.
Gill
Last edited by Gill on Wed Jan 09, 2019 9:11 pm, edited 1 time in total.
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

Topic Author
colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:10 pm

Gill wrote:
Wed Jan 09, 2019 9:09 pm
Are you married? That determines the amount of the exemption.
Gill
Nope, single

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Raybo
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Re: Attn Tax Experts: Sold Primary Residence

Post by Raybo » Wed Jan 09, 2019 9:11 pm

I am not a lawyer, tax accountant, or even up on the current tax laws. That said, I believe that if you lived in the house for 2 of last 5 years, then you get a $250,000 capital gains exemption. So, using your example, you shouldn't owe any Federal Taxes. However, you may owe state taxes, depending on where the house is located.

Note that while the IRS will be made aware that you sold a house and for how much, it doesn't know your basis, as it isn't reported when you purchase a house. I believe that you only have to file a form on your taxes if you owe tax. Otherwise, you don't have to report the sale on your Federal Tax for.

This was the situation when I sold my house in 2003. If things have changed, then ignore the above :happy
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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Re: Attn Tax Experts: Sold Primary Residence

Post by livesoft » Wed Jan 09, 2019 9:12 pm

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Gill
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Re: Attn Tax Experts: Sold Primary Residence

Post by Gill » Wed Jan 09, 2019 9:13 pm

Looks as if your gain may be in the range of $200K. No problem whatsoever.
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

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colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:15 pm

livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?

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Ben Mathew
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Re: Attn Tax Experts: Sold Primary Residence

Post by Ben Mathew » Wed Jan 09, 2019 9:18 pm

colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000?
There is no separate income tax on the sale of your house aside from the capital gains tax.

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colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:19 pm

Ben Mathew wrote:
Wed Jan 09, 2019 9:18 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000?
There is no separate income tax on the sale of your house aside from the capital gains tax.

That's what I thought! But I started to freak out. Thank You!

I will still get advice from a professional though B?C I am a good BH.

:sharebeer

livesoft
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Re: Attn Tax Experts: Sold Primary Residence

Post by livesoft » Wed Jan 09, 2019 9:20 pm

colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
Those are probably two separate questions. There will be no cap gains tax on the home cap gains if the home qualifies. I don't know about what is included in modified adjusted gross income for determining ACA subsidies.
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2015
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Re: Attn Tax Experts: Sold Primary Residence

Post by 2015 » Wed Jan 09, 2019 9:24 pm

colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
It sure affected mine. I am losing all PTC's as a result of substantial LTCG's. I will be writing Uncle Sam a nice fat check, but don't regret it. I would have lost even more had I waited to sell as the fan has been turned on high on real estate in my former VHCOL area.

As everyone is paying attention to all of Mr. Bogle's predictions which no one is supposed to be paying attention to anyway because BH's don't pay attention to predictions, I think I'll predict real estate in my former abode will continue to require a sweater, maybe even a jacket into 2019.

Topic Author
colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:27 pm

livesoft wrote:
Wed Jan 09, 2019 9:20 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
Those are probably two separate questions. There will be no cap gains tax on the home cap gains if the home qualifies. I don't know about what is included in modified adjusted gross income for determining ACA subsidies.
Thanks again. I guess the income/ACA subsidies are really my main questions. In other threads I read that the sale of a home will throw you MAGI into turmoil.

viewtopic.php?t=252559

Topic Author
colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:33 pm

2015 wrote:
Wed Jan 09, 2019 9:24 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
It sure affected mine. I am losing all PTC's as a result of substantial LTCG's. I will be writing Uncle Sam a nice fat check, but don't regret it. I would have lost even more had I waited to sell as the fan has been turned on high on real estate in my former VHCOL area.

As everyone is paying attention to all of Mr. Bogle's predictions which no one is supposed to be paying attention to anyway because BH's don't pay attention to predictions, I think I'll predict real estate in my former abode will continue to require a sweater, maybe even a jacket into 2019.
Thanks, I'm not sure I understand your metaphor but I think you are saying that I will pay income taxes/lose ACA subsidies because of this addition to my MAGI for the year 2019?

2015
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Re: Attn Tax Experts: Sold Primary Residence

Post by 2015 » Wed Jan 09, 2019 9:48 pm

colddeadfish wrote:
Wed Jan 09, 2019 9:33 pm
2015 wrote:
Wed Jan 09, 2019 9:24 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
It sure affected mine. I am losing all PTC's as a result of substantial LTCG's. I will be writing Uncle Sam a nice fat check, but don't regret it. I would have lost even more had I waited to sell as the fan has been turned on high on real estate in my former VHCOL area.

As everyone is paying attention to all of Mr. Bogle's predictions which no one is supposed to be paying attention to anyway because BH's don't pay attention to predictions, I think I'll predict real estate in my former abode will continue to require a sweater, maybe even a jacket into 2019.
Thanks, I'm not sure I understand your metaphor but I think you are saying that I will pay income taxes/lose ACA subsidies because of this addition to my net worth for the year 2019?
Sorry for the confusion. Yes. My LTCG's were such that they blew my 2018 income out of all PTC eligibility. As it was near the end of the year, I now have to repay all PTC's to the IRS. As I stated, I didn't care because I had the feeling real estate in that area would do exactly what it did and continues to do. Listings are staying on the market, sellers are taking their property off the market, and there have been some pretty large price reductions which would have been unheard of in that highly sought after market as recently as 2017.

Have you notified the ACA of your change in income? Whether you have to pay taxes depends on your tax situation. Do you have tax losses to carry over into 2019 to offset your gains?

Topic Author
colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 9:57 pm

2015 wrote:
Wed Jan 09, 2019 9:48 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:33 pm
2015 wrote:
Wed Jan 09, 2019 9:24 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
livesoft wrote:
Wed Jan 09, 2019 9:12 pm
IRS Pub 523: https://www.irs.gov/pub/irs-pdf/p523.pdf
Thank you, yes, I have reviewed this.

I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
It sure affected mine. I am losing all PTC's as a result of substantial LTCG's. I will be writing Uncle Sam a nice fat check, but don't regret it. I would have lost even more had I waited to sell as the fan has been turned on high on real estate in my former VHCOL area.

As everyone is paying attention to all of Mr. Bogle's predictions which no one is supposed to be paying attention to anyway because BH's don't pay attention to predictions, I think I'll predict real estate in my former abode will continue to require a sweater, maybe even a jacket into 2019.
Thanks, I'm not sure I understand your metaphor but I think you are saying that I will pay income taxes/lose ACA subsidies because of this addition to my net worth for the year 2019?
Sorry for the confusion. Yes. My LTCG's were such that they blew my 2018 income out of all PTC eligibility. As it was near the end of the year, I now have to repay all PTC's to the IRS. As I stated, I didn't care because I had the feeling real estate in that area would do exactly what it did and continues to do. Listings are staying on the market, sellers are taking their property off the market, and there have been some pretty large price reductions which would have been unheard of in that highly sought after market as recently as 2017.

Have you notified the ACA of your change in income? Whether you have to pay taxes depends on your tax situation. Do you have tax losses to carry over into 2019 to offset your gains?
Okay, I might need to delete this post and make a new post (the 1st was maybe too long).

Question: When you sold your primary residence (without capital gain tax) did you find that your MAGI was changed drastically? and did it affect your income taxes and ACA subsidies?

I'm not trying to get out of paying these potential taxes, I just want to know what to expect

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Nate79
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Re: Attn Tax Experts: Sold Primary Residence

Post by Nate79 » Wed Jan 09, 2019 10:41 pm

colddeadfish wrote:
Wed Jan 09, 2019 8:39 pm
Dear BH,

I have used the search feature, read previous questions and reply’s and read the tax code/worksheet.

I am still unclear about what to expect for tax year 2019. (I know! It’s early! But this is potentially a big hit for me and I want to plan!)

Sold house 1/8/19 for $380,000

After selling expenses, paying off mortgage etc. the potential 1099 will be ~ $300,000

I will also have ~ $25,000 of provable/deductible capital improvements (how far does this go back? All the way to purchase?).

I bought the house for $148,000 in 2001 (17 years)

So:

300,000 - $25,000 - $148,000 = $127,000 in capital gains. As an individual I won’t pay capital gains on this equity because it is less than $250,000 correct?

I'm trying to follow your wording here but it is confusing. You used the word mortgage in the discussion but it plays no part in the math.

Sales price - purchase price - selling costs - capital improvements = capital gain

I'm not sure how you went from a sales price of $380k to $300k in your math.

Topic Author
colddeadfish
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Repost: MGAI and sale of primary residence

Post by colddeadfish » Wed Jan 09, 2019 10:49 pm

[Thread merged into here, see below. --admin LadyGeek]

Hi,

I don't know how to delete my previous post but here is my actionable question:

If I have a +/-$100,000 of gains/equity from a primary residence home sale will this affect my MAGI or not? I know I won't pay capital gains tax (as I am an individual and the max is $250,000)

In your experience (if applicable) has this affected your income tax or ability to qualify for ACA subsidies?

Thanks!
CDF

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colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 10:55 pm

Nate79 wrote:
Wed Jan 09, 2019 10:41 pm
colddeadfish wrote:
Wed Jan 09, 2019 8:39 pm
Dear BH,

I have used the search feature, read previous questions and reply’s and read the tax code/worksheet.

I am still unclear about what to expect for tax year 2019. (I know! It’s early! But this is potentially a big hit for me and I want to plan!)

Sold house 1/8/19 for $380,000

After selling expenses, paying off mortgage etc. the potential 1099 will be ~ $300,000

I will also have ~ $25,000 of provable/deductible capital improvements (how far does this go back? All the way to purchase?).

I bought the house for $148,000 in 2001 (17 years)

So:

300,000 - $25,000 - $148,000 = $127,000 in capital gains. As an individual I won’t pay capital gains on this equity because it is less than $250,000 correct?

I'm trying to follow your wording here but it is confusing. You used the word mortgage in the discussion but it plays no part in the math.

Sales price - purchase price - selling costs - capital improvements = capital gain

I'm not sure how you went from a sales price of $380k to $300k in your math.
I had +/- $20,000 in broker fees and +/- $60,000 left on my mortgage = $80,000 (selling price cost?)

So: The remainder of my mortgage cannot be held against me correct?

michaeljc70
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Re: Attn Tax Experts: Sold Primary Residence

Post by michaeljc70 » Wed Jan 09, 2019 10:56 pm

Your 1099-S (if you get one) will have nothing to do with paying off your mortgage. The gain is net sales price-basis. Basis is your purchase price plus any capital improvements (there are a few other things too). The "net" in sales price would include commission.

As others said, you won't owe capital gains. It also wouldn't affect ACA subsidy eligibility because the gain will not appear on the 1040.

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Re: Attn Tax Experts: Sold Primary Residence

Post by Nate79 » Wed Jan 09, 2019 11:12 pm

colddeadfish wrote:
Wed Jan 09, 2019 10:55 pm
Nate79 wrote:
Wed Jan 09, 2019 10:41 pm
colddeadfish wrote:
Wed Jan 09, 2019 8:39 pm
Dear BH,

I have used the search feature, read previous questions and reply’s and read the tax code/worksheet.

I am still unclear about what to expect for tax year 2019. (I know! It’s early! But this is potentially a big hit for me and I want to plan!)

Sold house 1/8/19 for $380,000

After selling expenses, paying off mortgage etc. the potential 1099 will be ~ $300,000

I will also have ~ $25,000 of provable/deductible capital improvements (how far does this go back? All the way to purchase?).

I bought the house for $148,000 in 2001 (17 years)

So:

300,000 - $25,000 - $148,000 = $127,000 in capital gains. As an individual I won’t pay capital gains on this equity because it is less than $250,000 correct?

I'm trying to follow your wording here but it is confusing. You used the word mortgage in the discussion but it plays no part in the math.

Sales price - purchase price - selling costs - capital improvements = capital gain

I'm not sure how you went from a sales price of $380k to $300k in your math.
I had +/- $20,000 in broker fees and +/- $60,000 left on my mortgage = $80,000 (selling price cost?)

So: The remainder of my mortgage cannot be held against me correct?
As was said you will pay off the mortgage as part of the sale but this isn't part of the gain calculation. So no, you do not subtract the $60k.

curmudgeon
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Re: Repost: MGAI and sale of primary residence

Post by curmudgeon » Wed Jan 09, 2019 11:12 pm

As long as your gains from the house sale are under the exclusion amount, there won't be tax, and there won't be an impact on ACA subsidy/eligibility. Taking the number from your other post, you have $380K sale price, minus $20K sales expense, minus $25K improvements, minus $148K original cost. This give $187K of capital gains on the sale, which is under the $250K single exclusion. You should be home free.

As an example of what would have tripped you up, if you had sold for $480K, then you would have ended up with $37K going into your gross income. In that case, you might or might not have had tax due from it, but it would have played havoc with the ACA subsidy.

Topic Author
colddeadfish
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Re: Attn Tax Experts: Sold Primary Residence

Post by colddeadfish » Wed Jan 09, 2019 11:21 pm

michaeljc70 wrote:
Wed Jan 09, 2019 10:56 pm
Your 1099-S (if you get one) will have nothing to do with paying off your mortgage. The gain is net sales price-basis. Basis is your purchase price plus any capital improvements (there are a few other things too). The "net" in sales price would include commission.

As others said, you won't owe capital gains. It also wouldn't affect ACA subsidy eligibility because the gain will not appear on the 1040.
Thank You. Great. So the simplified math is:

380,000 sales price
-$148,000 purchase price
-20,000 sales cost
=$212,000 equity

I think I get it now. Much appreciated.
CDF

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colddeadfish
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Re: Repost: MGAI and sale of primary residence

Post by colddeadfish » Wed Jan 09, 2019 11:37 pm

curmudgeon wrote:
Wed Jan 09, 2019 11:12 pm
As long as your gains from the house sale are under the exclusion amount, there won't be tax, and there won't be an impact on ACA subsidy/eligibility. Taking the number from your other post, you have $380K sale price, minus $20K sales expense, minus $25K improvements, minus $148K original cost. This give $187K of capital gains on the sale, which is under the $250K single exclusion. You should be home free.

As an example of what would have tripped you up, if you had sold for $480K, then you would have ended up with $37K going into your gross income. In that case, you might or might not have had tax due from it, but it would have played havoc with the ACA subsidy.
Thanks for the reply and your patience with my fumblings, I think I get it now and will do better to educate myself in the future.
:sharebeer

2015
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Re: Attn Tax Experts: Sold Primary Residence

Post by 2015 » Thu Jan 10, 2019 1:23 pm

colddeadfish wrote:
Wed Jan 09, 2019 9:57 pm
2015 wrote:
Wed Jan 09, 2019 9:48 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:33 pm
2015 wrote:
Wed Jan 09, 2019 9:24 pm
colddeadfish wrote:
Wed Jan 09, 2019 9:15 pm
...
I understand that I won't be charged any capital gain tax...but will I pay income tax on the $127,000? and will it effect ACA subsidies?
It sure affected mine. I am losing all PTC's as a result of substantial LTCG's. I will be writing Uncle Sam a nice fat check, but don't regret it. I would have lost even more had I waited to sell as the fan has been turned on high on real estate in my former VHCOL area.

As everyone is paying attention to all of Mr. Bogle's predictions which no one is supposed to be paying attention to anyway because BH's don't pay attention to predictions, I think I'll predict real estate in my former abode will continue to require a sweater, maybe even a jacket into 2019.
Thanks, I'm not sure I understand your metaphor but I think you are saying that I will pay income taxes/lose ACA subsidies because of this addition to my net worth for the year 2019?
Sorry for the confusion. Yes. My LTCG's were such that they blew my 2018 income out of all PTC eligibility. As it was near the end of the year, I now have to repay all PTC's to the IRS. As I stated, I didn't care because I had the feeling real estate in that area would do exactly what it did and continues to do. Listings are staying on the market, sellers are taking their property off the market, and there have been some pretty large price reductions which would have been unheard of in that highly sought after market as recently as 2017.

Have you notified the ACA of your change in income? Whether you have to pay taxes depends on your tax situation. Do you have tax losses to carry over into 2019 to offset your gains?
Okay, I might need to delete this post and make a new post (the 1st was maybe too long).

Question: When you sold your primary residence (without capital gain tax) did you find that your MAGI was changed drastically? and did it affect your income taxes and ACA subsidies?

I'm not trying to get out of paying these potential taxes, I just want to know what to expect
Absolutely. I had originally planned to manipulate taxable income from various sources to amount to only $23K for purposes of taxes and the ACA, placing me squarely within 150%-200% federal policy level guidelines. As a result, I qualified for and had the Silver 87 plan which included IIRC about $10K in tax credits and approx. $2k in subsidies (many people get the terminology between tax credits and subsidies mixed up---they are two different things).

My LTCG's from my sale even after the $250K exclusion and other allowable deductions (be sure to research allowable deductions!) placed me far far above the 400% FPL limits so I fell off the tax credit/subsidies cliff. While I will have to repay the PTC's, my research shows there is no provision in the law requiring subsidies repayment. As to increased fed/state taxes, I had only planned to pay a combined $600 for 2018. As a result of rather obscene LTCG's from the sale, I'll be paying multiples of that figure.

As I stated above, I don't regret my change in strategy resulting paying more in taxes. As my plans to move were short term, I didn't want to risk getting caught in a real estate crash. Had I waited to sell even now, it is highly likely I would have lost even more in the value of the property than I will have to pay in taxes as a result of real estate cooling in 2018 which has extended now into 2019.

It's good to remember your and my having to pay more taxes from real estate gains are first world problems. We tend to forget all real estate is local and far too many people weren't as lucky as you and I were to even have LTCG's.

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Re: Attn Tax Experts: Sold Primary Residence

Post by LadyGeek » Thu Jan 10, 2019 4:06 pm

colddeadfish - In order to give appropriate advice, it's best to keep all the information in one spot. I merged your updated question back into the original discussion.
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