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Old 10-15-2013, 10:50 AM
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Need help with 0% Capital Gains Rate on Sale of Home

I purchased my home in 1994 and sold it in 2012. The gain on the sale exceeds the $250,000 exemption I qualify for as a single filer.

Last year I earned less than $35,000 so I expect to qualify for the 0% Capital Gains Rate. However, Turbotax is showing that I owe tax on the sale.

The income I earned was Line 12 Business (Self-employment) Income, and not Line 7 Wages, salaries income. Does this matter? What else would be affecting this? Line 44 tax rate is 10%, so I should qualify for the 0% Capital Gains rate, no? Why isn't Turbotax generating this?



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Old 10-16-2013, 10:02 AM
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Originally Posted by Klaus View Post

#1;The income I earned was Line 12 Business (Self-employment) Income, and not Line 7 Wages, salaries income. Does this matter?



#2;What else would be affecting this? Line 44 tax rate is 10%, so I should qualify for the 0% Capital Gains rate, no? Why isn't Turbotax generating this?
#1;I am not familiar with the TB tax software however, basically, If you sell your primary home, you may not have to pay capital gains taxes up to $250K as single in your case, however, income from the sale of any other real estate or business property is fully taxable., So, I don’t think so UNLESS you file form 4797;the income misreported as self employment on line 12 can increase your Self employment tax by being reported on Sch C/Sch SE but doesn’t affect your capital gain tax/tax rate since the misreported income on line 12 doesn’t increase your marginal tax rate;as you can see, the self-employment tax rate for self-employment income earned in calendar year 2012 is 13.3%, NOT 15.3%, (10.4% for Social Security and 2.9% for Medicare). For self-employment income earned in 2013, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

#2; As mentioned above. As long as your misreport additional income on your software then this may increase your tax bracket and your capital gain tax rate and capital gain tax liability, however, as long as you misreport your wage as your self employment income, this doesn’t affect your marginal tax rate/CG tax rate either(but it affects your self employment tax /soc sec tax liability as mentioned above).The misreported self employment tax may decrease your marginal tax rate due to SECA tax liability.



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