2020 capital gains questions

[Jason Allen]

I bought a place three years ago and I’m thinking about selling it for a capital gain around 20 K my gross annual income adjusted is $50-$60,000. I am trying to figure out capital gains tax and what I don’t know is if the capital gains is added on to the rest of my income.

After expenses I will also show a profit from my other rental properties of around $15,000.

And I am considering selling another property that will give me a net capital gains of around $60,000 and want to know if I should push the sale of this property off on the 2021 so that it does not affect the capital gains rate on my other property?

Summary file married jointly

W-2 income of around 50–60 K 

Rental income around 15 K

Capital gains on property a 20 K

Capital gains on property be 60 K

I have the availability to put a lot into my 401(k) if I need to lower my income or into IRAs in order to lower my income up to the limits if necessary to avoid paying undue taxes.

What would you do?

[David M.]

@Jason Allen

With the current tax law passed by Trump, you basically will have 15% long term capital gains tax.  If the rest of your taxable income is less than $78,750, I believe that amount below the limit would be 0%.  In your case, it 'looks like' (talk to your accountant and/or look at your old tax returns) your current taxable amount before the long term capital gains would be below the limit.  So, if you wanted to maximize how much is taxed at 0%, you might want to hold off on the property sale.  But, again, I don't know if its worth taking the risk that your project sale price will change (downward) vs how much tax you will really save.

Roughly, lets say you could have $20k of long term capital gains at the 0% marginal rate, that will save you $3k in taxes.  Of course, $3k is a fair amount of taxed saved --- that's 5% of your W2 income.

Good luck, however you decide.

for reference:
https://www.irs.gov/taxtopics/tc409