Long Term Capital Gains Tax

Submitted by Robert Goldsmith on Thu, 2022-06-09 21:46

This is not specific to IRA, but I wanted to see if I have this correct. If A client acquired a RE property that eventually became a rental property 4 years ago, But during a tough financial year, they sold that property and earned a $200,000 Long term capital gain. If their married filing joint taxable income for the year was only $50,000 (below the threshold) do they owe any captial gain on the sale of that rental propertly. Thank you



Submitted by William Tuttle on Thu, 2022-06-09 22:11

With that said:

  • If you were referring to the real estate capital gains tax exclusion. It only applies to a property you lived in for two of the five years prior to date of sale.
  • Otherwise, they will owe capital gains taxes on the $200K.
  • The other taxable income would only be used to determine any amount of the capital gains subject to the additional 3.8% NIIT.


Submitted by Robert Goldsmith on Fri, 2022-06-10 17:17

Thank you reply. The thought process here is that “the gain” is Not on residential where there is an automatic exclusion, but on a rental real estate asset that was held for more than 5 years as “investment property” and when sold it would if I am correct be considered a “Long Term Capital Gain” which would fall under a different set of rules (not a one year or less gain) and that if the earned income was less than $70K that there is no tax on the long term gain? 



Submitted by William Tuttle on Sat, 2022-06-11 03:07

While it would be a LTCG, you are not correct in how CG tax brackets work. The client needs to engage a competent accountant. I will not be making any further replies to this off-topic post.



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