Several items come into play to calculate taxes on a home sale.
Q. My mom is widowed, with my dad having been deceased for five years. She is selling her home, worth $1.1 million, and moving in with me in a new, bigger house, which I will own by myself. She wants to gift me $150,000 toward the new house. What will my mom’s taxes be when she sells and at what tax rate?The tax, if any, will depend on her specifics. But here’s generally what she needs to know.said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
Next, add 50% of all major improvements, such as a new kitchen or bathroom, he said, and then you add 50% of the value of the house as of your father’s date of death.“The difference between the selling price of the house less the closing costs of the sale, less the basis that was calculated, is her profit on the sale,” Karu said. “If that amount is $250,000 or less, the tax on the transaction is zero.
Any gain over $250,000 will be taxed at her applicable capital gains tax rate plus state tax at her applicable rate, he said.“Gifts may be taxable, but, in all likelihood, this will not be,” he said. “Annual gifts of $16,000 or less to any number of people is tax exempt. After that, a gift tax return must be filed and, to avoid the tax, the donor would use part of his/her lifetime exemption.”
If you’re not sure, work with a qualified tax professional who can review the specifics of your mom’s home sale.
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