Capital Gains Rates 2008
I have been reading that capital gains rates for 2008 will fall, assuming my income was -0- does anyone know what my capital gains rate for 2008 would be on about 200K
I have been reading that capital gains rates for 2008 will fall, assuming my income was -0- does anyone know what my capital gains rate for 2008 would be on about 200K
Where have you been reading this?
2008 IS currently scheduled to drop the capital gains rates (unless Congress changes the rules). Individuals who currently would be taxed at a 5% cap. gain rate (these are individuals who are in the 10 or 15% tax bracket) would drop to zero. This is a ONE year drop that was part of the Tax Act (Jobs and Growth Tax Relief Reconciliation Act of 2003, as amended by Tax Increase Prevention and Reconciliation Act of 2005).
Keep in mind that depending on your income, you may not fully benefit (or at all) from this lower rate if you have other income because it may subject you to the alternative minimum tax (26%), so be sure to calculate taking that into account.
Quote:On 2007-03-14 11:11, csittko wrote:
I have been reading that capital gains rates for 2008 will fall, assuming my income was -0- does anyone know what my capital gains rate for 2008 would be on about 200K
In 2008 only, short term capital gain willl be taxed at your ordinary income tax rateotherwise, a long term capital gain will be taxed as follows:The capital gain due to depreciation recapture will be taxed at 25%
For the balance of your capital gain, any gain earned in the 15% tax bracket or lower will be tax free.
Any remaining capital gain will be taxed at 15%.Of course, this assumes that you will not be subject to AMT. If your capital gain is large enough, then AMT tax rates could apply.[ Edited by NewKidInTown3 on Date 04/18/2007 ]
On May 17, 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA).
The preferential dividend and capital gains tax cuts established under the Jobs Growth Tax Relief and Reconciliation Act of 2003 are extended another two years under TIPRA, and are now scheduled to expire at the close of 2010.
Under these rules, the current maximum tax rate applicable to long-term capital gains and qualified dividends is 15 percent. This maximum rate is reduced to 5 percent for taxpayers in the 10 percent and 15 percent income tax brackets. In 2008, and now extended for 2009 and 2010, the preferential tax rate for those in the 10 percent and 15 percent tax brackets drops to 0 percent.
If you have made a sincere effort to rent the units and just could not make a go of it, then rehabbing may make the units more attractive to renters and generate a market rate rental income. If all your efforts to rent the units fail, then selling may be your best opportunity to still profit.
If your holding period is one year or less, the short term capital gains tax rate is the same as your ordinary income tax rate. Self employment income tax will not apply in this situation.
If the holding period is more than one year, then the maximum 15% capital gains tax rate applies.[ Edited by NewKidInTown3 on Date 08/28/2007 ]
Newkid,
Is this ( no SE tax) because of the "sincere effort to rent"? The intent was to hold rather than flip?
As always I appreciate and respect your input on these matters-
Chris
"Special treatment" is no SE tax- that is a more than 18% savings...
Chris
You guys are awesome! Thanks.
If your holding period is one year or less, the short term capital gains tax rate is the same as your ordinary income tax rate. Self employment income tax will not apply in this situation.
If the holding period is more than one year, then the maximum 15% capital gains tax rate applies.
I ran into this situation a few years ago where I had the intent to rent back to the people who sold me a house. It appeared that this might not happen and I did not particularly wish to hold a property in that neighborhood. I contacted a qualified intermediary to see if the house would qualify for a 1031 exchange and was told that it would since my intent was to rent even though I collected no rent.
This might be a possibility for you if you can find a property that you are more comfortable with for holding and renting for a bit. This way the gain will be passed on to the new property(ies) and be treated as long term gain provided you hang onto the new property for a time. I am pretty sure that you would be allowed long term gain if the sum of the times for holding your 5 unit and replacement property(ies) exceeds one year.
As an aside, I almost always exchange properties in CA to avoid the CA witholding.[ Edited by edmeyer on Date 08/28/2007 ]
[ Edited by rubyarias on Date 08/29/2007 ]
OOPS!
I thought I was talking about tax avoidance.
Thank you Chris.
Regards,
Ruby
For a single family dwelling, the tax savings you gain through accelerated depreciation is usually not worth the expense of a professional Cost Segregation Study.
For example, the SFR you want to place in service as rental has a ten year old refrigerator that has a thrift shop value of only $100 and a free standing range worth only $50. Each of these assets could be depreciated over 5 years if segregated versus depreciated over 27.5 years as part of the building structure.
What I usually do is just depreciate the entire structure and all the appliances, landscaping, and carpet as a single asset over 27.5 years. As I replace carpet or appliances, I open a new 5 year depreciation schedule for each replacement item using its actual cost to purchase, deliver, and install as the depreciaton basis.
mstahl,
But why bother with the time and cost of a study for a sngle family dwelling unit, when so much of the property that would be segregated is 27.5 year property? The roof, HVAC, wiring, plumbing, windows, doors, cabinets, countertops, toilets, lighting fixtures, and even the smoke detectors are all integral components or permanent fixtures of the building structure and are 27.5 year property.
mstahl,
But why bother with the time and cost of a study for a sngle family dwelling unit, when so much of the property that would be segregated is 27.5 year property? The roof, HVAC, wiring, plumbing, windows, doors, cabinets, countertops, toilets, lighting fixtures, and even the smoke detectors are all integral components or permanent fixtures of the building structure and are 27.5 year property.