USA Avoid Capital Gains tax on Real Estate profit by earning income abroad - can I?

[AlexLandlord]

Hello and thanks for setting up this site!

I have been renting out a home for about 3.5 years, and I would like to sell it in 2017 - which will lead to signifcant profit.

I understand I can't use the "2 of the last 5 years" exclusion, as I have been renting for over 3 years.

So it seems I must pay capital gains tax.

However, looking at the rates for long term capital gains, it seems that a couple filing jointly with an income under ~ $79,000 has a rate of 0% for long term capital gains.

Thus, my understanding is that as long as I avoid crossing the $79,000 income level this year, I am free from capital gains when I file taxes in April 2018 (for year 2017)

Q1-> are the above statements correct?

Q2-> if I make money working outside the US (Japan or Brazil, specifically), does that money count towards the US$ 79,000 limit?

Thanks,
Alex

 

[Nicky]

Q1: It's correct based on your facts. You could earn another 17K and still pay no tax taking into account the standard deductions and the personal exemptions. Depending on which state you live in, you will have to pay several thousands in taxes, or none if in a no-income tax state.

Q2: It has to be earned income like wages or being self-employed. And you have to be living there at least 330 days
out of any consecutive 12-month year and/or meet other tests.