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Old 05-25-2015, 12:41 AM
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Gain on sale of principal residence and AMT

If gain on sale of principal residence occupied for 6 years is 190,000 and this is a high income year, does the gain impact taxes in terms of AMT or other rules? Or is the capital gains tax free regardless of other facts.



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Old 05-25-2015, 11:17 AM
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If gain on sale of principal residence occupied for 6 years is 190,000 and this is a high income year, does the gain impact taxes in terms of AMT or other rules? =============>>>>>>>>No; when you have a gain from the sale of your priamry home, you can exclude up to $250,K of the gain from your income ($500K on a MFJ return). If you can exclude all of the gain, you do not need to report the sale on your 1040; you do not need to report the sale of your primary home on 1040 unless: you have a gain and do not qualify to exclude all of it; you have a gain and choose not to exclude it; you have a loss and received a Form 1099-S.also Qualified Small Biz Stock held by non-corporate taxpayers can qualify for a 100% exclusion from the amt.


Or is the capital gains tax free regardless of other facts.================>>It depends ; aslongas you are subject to the AMT, the IRS exempts a few different types of income from it. Your LTCG income and your specially taxed dividend income escape the AMT, and benefit from the special tax rates applied to them. However, while your capital gains aren't subject to being taxed at AMT tax rates , 26%/ 28%,as you can see, they do get added into the income(as part of AGI/TI) that gets used for AMT calculations. Once your AMT income hits a certain threshold , say $115.4K or $153.9K, as of 2013, you have to subtract 25 cents from your exemption for every dollar of additional income. This means that if you have large capital gains, you'll end up paying AMT on more of your income. For example, say MFJ makes $145K in AMT income , AMTI I mean, in 2013. Barring any gains, they'd be eligible to take the full $80.8K exemption, leaving them with $64.2K of AMT base on which they'd pay the 26 percent rate. If, at the last second, they decided to sell stock and take a $50K capital gain, they'd have to add that $50K to their AMT income, giving them a total income of $195K. The IRS will make them subtract from their exemption 25 cents for every dollar of income over $153.9K. The extra $41.1K in income over the threshold adds $10.275K to their AMT base, leaving them subject to paying TMT/AMT on $74.475K ;the original $64.2K plus the new $10.275K. This costs them an additional $2.672K. in TMT/ AMT income tax as well as the $7.5K capital gain tax ; 15 %* $50K gain. As you know AMT is when TMT>regular tax liability.



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Old 05-26-2015, 12:42 AM
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Thank you for the fast and comprehensive reply.

It is very helpful and covers the question.



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