Question:
I created a living revocable trust and sold a house that was in the trust. The purchase price was $115,000 and we made improvements which cost $7,800, which brings the cost basis to $122,800. The selling price was $190,000 the fees paid by seller (myself) were $17,574. Does this mean I will be taxed on $67,200 or $49,626k? Would the tax be $3,491, 37% of everything over 13,450? Is there a different rate for a long-term vs. short-term?
Response:
Your capital gain will be the lower figure, the $49,626. You can deduct the broker’s fee and any other selling costs.
Assuming you owned the house for at least a year, it will be subject to long-term capital gain rates. They are graduated based on your income, including the capital gain. If you are single, in 2023, there’s no tax for income up to $44,625, a 15% rate if your income is between $44,626 and $492,300, and 20% above that rate. So, it’s likely that the tax rate will be 15%, for a tax of $7,443.90, plus any state tax on capital gains. I’m assuming this was not your home. If it were, you could exclude the first $250,000 of gain from taxation.
