17 Mar I sold a vacant lot at the shore. What do I owe in taxes?

Q. In 1968 my husband and I purchased a vacant lot at the shore with both names on the deed. He passed away in 2008. I sold the lot in 2021 and I would like to know if I am entitled to a step up in cost basis for capital gains calculations.
— Widow

A. We’re sorry to hear about your husband.

If both names were on the deed, then most likely you both owned the land as joint tenants with right of survivorship.

Your husband’s one half of the land would be able to get a step-up in basis of the appraised value of the land when your husband passed away back in 2008, said Patricia Daquila, a certified financial planner and certified public accountant with Peapack Private Wealth Management in New Providence.

The other half of the land would retain the original cost basis when you purchased the land back in 1968, she said.

Daquila offered this example:

Let’s say you originally paid $10,000 in 1968 for the land. When your husband passed away in 2008, the appraised value of the land was $100,000.
Your basis when you sold the land in 2021 would be one half of your original basis ($10,000 divided by 2 equals $5,000) and one half of the appraised value of the land in 2008 ($100,000 divided by 2 equals $50,000).

The total cost basis of the land would be $55,000, she said.

“If you sold the land for $400,000, then you would have a long-term capital gain of $354,000 ($400,000 minus $55,000),” Daquila said. “This would be taxed at the long-term capital gains rates for Federal tax which could be either 0%,15% or 20% depending on your taxable income.”

She said the tax rate on most net capital gains is no higher than 15% for federal tax purposes unless your taxable income is higher than $40,400 but less than $445,850 for single individuals or more than $80,800 but less than $501,600 for married couples filing jointly.

New Jersey does not have a capital gains rate, she said.

If you’re not sure of the specifics in your case, consider checking with a tax advisor.

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This story was originally published on March 17, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.