Charleston Real Estate Market

The words Capital Gains Tax  loom large in the mind of anyone contemplating selling investment property.

Disclaimer: I’m no accountant or tax attorney and that’s who you’ll need to ask about this information and how it relates to your specific situation.  There,  I feel better now that you know this.

First,  let me help you figure the difference between long and short term gain. You don’t want the latter.

Long term capital gains rates apply to an asset that you have held for at least 366 days. Short term is held for 365 days or less and is taxed at your ordinary income tax rates which could be as much as 35%. I can tell you from experience that this hurts.

Right now, long term capital gains are taxed at 5% (for those in the 10-15% federal tax bracket), taxed at 15% (for those in the 25% or higher tax brackets), and there’s a 25% tax that applies to any part of the gain that’s linked to appreciation.

  Effective January 2008, taxpayers who fall into the 10% or 15% income tax brackets will have NO capital gains tax in 2008, 2009 and 2010. Of course, this could change  if Congress decides to addresses it.

If you reside in the 25% or higher income tax brackets, you can still count on the 15% rate for those three years.  This part of the rule was set to expire at the end of 2008 but has been extended through 2010.

Unless changes are made by Congress, all capital gains will revert to the 2002 levels in 2011. That would mean 10% capital gains tax for the 10% and 15% tax brackets and 20% for those in the 25% or higher brackets.

 This is very important for your planning so talk to your accountant or tax attorney to get the best yield from your real estate portfolio by taking less of a hit.

Filed under: Business News, Real Estate News on April 23rd, 2008