Primary residence sale and early retirement planning

[digi-dom53]

I bought a home in Oregon in 2009 for $90,000 and estimates now show a market value closer to $450,000, maybe higher depending on neighborhood. I plan to keep it until my mid50s then sell so I can travel. My question is whether AMT could kick in on capital gains after I exclude the portion allowed for a primary residence under IRS §121. Also want to know what happens if my total income is relatively high in the selling year. Has anyone here been through a similar sale and seen if AMT added much tax?

 

[heeheeecub]

The capital gain exclusion for a primary residence under IRS Section 121 is generally not considered a tax preference item for Alternative Minimum Tax calculations. This means the excluded amount is not subject to AMT. But the taxable portion of your gain which would be the amount over the $250K for a single person or $500K for a married couple would be added to your total income in the year you sell. This could push you into a higher tax bracket and subject your capital gains to a higher rate. Your overall tax liability will definitely increase but it's more of a regular capital gains tax issue than a surprise AMT one.

 

[digi-dom53]

The capital gain exclusion for a primary residence under IRS Section 121 is generally not considered a tax preference item for Alternative Minimum Tax calculations. This means the excluded amount is not subject to AMT. But the taxable portion of your gain which would be the amount over the $250K for a single person or $500K for a married couple would be added to your total income in the year you sell. This could push you into a higher tax bracket and subject your capital gains to a higher rate. Your overall tax liability will definitely increase but it's more of a regular capital gains tax issue than a surprise AMT one.

This helps narrow the focus to regular capital gains planning rather than AMT surprises. Did you encounter any state-level tax differences when you sold, or were they mostly limited to the federal side? If I can confirm both angles before year-end planning, I can close this thread then.

 

[Emily Jackson]

I’ve been through a similar sale, and AMT didn’t really add much once the §121 exclusion was applied. The bigger factor was overall income in the sale year, so planning the timing can make a difference

 

[digi-dom53]

I’ve been through a similar sale, and AMT didn’t really add much once the §121 exclusion was applied. The bigger factor was overall income in the sale year, so planning the timing can make a difference

Thanks, Emily. Helpful to hear a confirmation that timing is the bigger factor over AMT. I'm still hoping someone might have insight into how Oregon handles this specifically.