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What tax rates apply to sale of Calif residence?

I am confused about the fed and state tax rates that apply to the sale of a home in Calif.

I know there are a lot of factors to consider. Assume the conditions meet the requirements for the fed (and state) homeowner's exclusion of $250,000 (single).

I assumed that the fed tax rate is 15% (LT cap gains) and the Calif tax rate is up to 11.3% (max marginal rate for total taxable income less than $500,000).

Is that right?

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Note that I am asking about the actual tax rates, not withholding rates.

When I poke around the internet, I see references to other "tax" rates. Sometimes, they seem to be talking about __combined__ fed and Calif rates. But I wonder if sometimes they are confusing withholding and actual tax rates.

For example, an article at

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states: "The 2013 California real estate tax law rules concerning capital gains on sale of long-term assets hasn?t changed since January 1, 1998. Since that time, gains from all long-term capital assets (i.e. homes) are taxed at the rate of 20%, or 10% for taxpayers in the 15 percent tax bracket. Recent changes in the law now impose a surtax [linked] of 3.8% on gains under certain conditions."

10% or 20%: say what?!

And when I follow the "surtax" link --

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-- the webpage talks about a __fed__ medicare surtax on "singles" with an AGI over $200,000, apparently part of Obamacare law. Well, that might be relevant. I'll research it. But any insights from you would be useful.

Nonetheless, the example on that surtax webpage computes an __effective__ tax rate (not marginal) of 33% for fed and state (for filing joint, not single as in my case). Say what?!

If someone could break down the tax calculation on that webpage, that might be helpful.

And thanks for any other details that help me understand the total applicable tax (not withholding).

Reply to
qguy
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You pay federal and state tax on the profit above 250k if single, and

500k if married. The federal rate is the long term rate, which is 20% if your income is over 400k (if single), and if over 450k (if married). Otherwise it is most likely 15%. There is also a 0% rate if your income is low enough.

In addition, if your income is above 200k there is an additional 3.8% tax on the amount above 200k. Also, all of your other investment income is subject to this tax, and your salary income is subject to

0.9%. In other words a huge capital gain and make your income so high that the Obamacare medicare tax will apply to possibly all of your income.

In CA, they honor the exemption. The resulting profit is taxed at ordinary rates, which is as high as 13.3% on income above $1M if single.

If you had a rental that you converted into personal property, then the

250k exclusion is reduced.

If you are not a CA resident then there is mandatory withholding based on the sale price, not on profit, and you can file a 540-NR to request a refund of excess tax withheld.

Federal rate could be 20%.

Yes

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tml says that on income over 508,500 tax is 12.3%. So just below this amount you're looking at 11.3%; so you are correct.

Reply to
remove ps

Oh, I was not aware of that. Thanks.

Reply to
qguy

The above reply is misleading. Application of the 3.8% Medicare Contribution Tax aka Net Investment Tax (NII) is not applied to the income above $200K for a single person. The 3.8% is applied to the LESSER OF your net investment income or the amount that Modified Adjusted Gross Income (MAGI) exceeds the applicable threshold. For our purposes (single person), that threshold amount is $200,000 of MAGI. A couple of examples:

Your noninvestment MAGI (let's say wages) is $175,000. Your NII is $50,000 (interest, dividends, cap. gains, etc.). MAGI is $225,000. You pay the 3.8% on the LESSER OF the excess over $200,000 or the NII. In this example the LESSER OF is $25,000.

You live on investment income. Your MAGI and NII is $250,000. The 3.8% tax is applied to $50,000, the amount in excess of $200,000.

In addition to the above, for those individuals who are working and have earned income (compensation for your labor or services) the Medicare tax component of FICA is increased from 1.45% TO 2.35% when earned income exceeds $200,000 for a single person. The extra .9% is only applied to the amount of earned income in excess of $200,000. In other words, you pay 1.45% on the first $200,000 of earned income and 2.35% on earned income in excess of $200,000.

You can find more info on the NII at:

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..and info on the .9% medicare tax at:

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Reply to
Alan

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