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How much should I reserve for taxes on my home sale?

May 14, 2004


From:  Carolyn
Date:  Mon, 19 Apr 2004

My husband and I have lived in the same home since 1973. If we sold the home, wed have a capital gain of about $1 million. Even with the $500,000 exclusion, there still will be a lot of tax (federal and California) to pay. Im also worried about the AMT. Can you tell us how much to reserve for taxes?

Answer

Date:  Fri, 30 Apr 2004

Hello Carolyn,

You are right to be concerned about the AMT. The California tax is not deductible for AMT, so you will be subject to that tax. You should reserve about 25% of the gain in excess of the $500,000 exclusion for income taxes.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

How much should I reserve for taxes on my home sale?

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