If you are a senior citizen (over age 65) about to sell off property in Georgia, you probably have some questions about the taxes you’ll have to pay: Do senior citizens have to pay taxes when selling their home? Do I still have to pay a capital gains tax?
Or perhaps you’re helping your elderly mom, dad, or friend sell a home to pay for senior care. Not only do you have to account for minor and major home repairs, but you also have to consider the taxes you will have to pay if you make a profit.
What Taxes Do Senior Citizens Have to Pay When Selling Their Home in Georgia?
While senior citizens get breaks on property taxes, the same doesn’t apply to capital gains taxes for selling a home. Capital gains tax is a tax on profits from the sale of an asset held for more than a year. No matter how old the homeowner is, they will be held to the same capital gains tax guidelines as everyone else. There’s no exemption for senior citizens.
However, homeowners can receive a tax break depending on a couple of factors. If the house being sold is the primary personal residence, and the homeowner lived in the home for at least two years over the past five-year period, they will not have to pay capital gains taxes if their profit is less than $250,000, if filing “Single”. If filing “Married Filing Jointly”, the homeowners won’t have to pay taxes on profits less than $500,000 so long as both spouses lived in and owned the home for at least two years.
Let’s say you have an elderly father or mother who is selling a house in Georgia for a $260,000 profit. If they’ve only lived in their house for a year, you may want to assess if it makes more sense to wait another year to avoid paying capital gains taxes. Is the amount you’ll owe in capital gains taxes more than what you’ll spend on a year’s worth of mortgage payments? If you decide to wait two years and exercise the capital gains exclusion, you must wait two years before using the exclusion again for another property you want to sell.
How Much Should I Expect to Pay in Capital Gains Taxes?
Gains greater than the amounts mentioned above must be reported to the IRS. Properties owned for less than a year before being sold are subject to tax rates equal to the homeowner’s ordinary income tax rate. Long term capital gains tax for properties or assets held longer than a year may be subject to a 15%-20% capital gains tax depending on the homeowner’s tax bracket. Homeowners that fall in a 10%-15% tax bracket are not required to pay any capital gains tax. This tax bracket exemption is helpful for many senior citizens who are likely not earning full time salaries like they used to.
Other Important Capital Gains Tax Information for Elderly Homeowners
- If you’re a widow, and you and your spouse qualified for the less-than-$500,000 in profit exemption, you can still claim that much if you sell within two years of your spouse’s passing.
- Homeowners can offset capital gains with capital losses in order to lower their capital gains taxes.
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