sold my rental property, should i file jointly or separately?

Forum|Forum|3 years ago
April 3, 2023
1 reply
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i sold my house in Washington and has a $1m+ long term capital gain. If we continue to file jointly as past years, long term capital gain rate would be at 15%.

I am considering should i file separately, as my wife's long term capital gain rate would be at 0% and mine at 20%, so it's effectively 10% now (assuming both my wife and i owns 50% of house). does that even make sense at all? does that worth exploring?

TurboTax Home & Biz Windows

Mike9241

you have the desktop app. so for no cost you can do 3 returns - 2 married filing separately and a joint return

you both must either itemize (splitting deductions) or use the standard deduction. for both of you part of that gain will be section 1250 (gain to the extent of depreciation allowed or allowable) which can be taxed at 25%

also, note that MFS the capital tax rate brackets are cut in half. and your wife's capital gain rate won't be 0%. also with so large a capital gain you'll be paying an additional 3.8% net investment income tax.

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you may be shocked to find that if your spouse's only taxable income was $500,000 of long-term gains even ignoring 1250 recapture her tax would be close to $100,000

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if taxable income was only LTCG

only about the first $55K is taxed at zero

the next $217K is tax at 15%

anything over 20%

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but do the calcs since you haven't really provided all info necessary.