Capitol Gains Rate
Is there a flat rate on capitol gains from an investment property, or is it based on your income? I've owned and rented a house (never lived in) for about 9 years. I've claimed depreation over that time period so it looks as if I'm going to get zonked for some serious gains.
Yes, you will get whacked. You could roll it into another property through 1031 exchange. If you pay the same or more for the next property you pay no capital gains. some people even move back into a place for 2 of the past five years, so part of that is initial residence. Check with your CPA. Its can be as much as 30% between state and fed where I am...you could also purchase a vacation home, rent it out for a while then move in as initial residence later if you are close to retirement.
Yes, there is a flat rate AND it is based upon your income.
If you are in the 15% tax bracket (or lower), the long term capital gains tax rate is 5%.
If you are in the 25% tax bracket (or higher), the long term capital gains tax rate is 15%.
Depreciation taken since 1997 is recaptured at 25%.[ Edited by NewKidinTown2 on Date 12/14/2004 ]
Thanks for the reply. If I understand correctly, the maximum gain is 15 percent except on the depreciation I've claimed which would be 25%?
That's correct, but, if I remember correctly, even though your capital gain is taxed at 15%, it may push your other income into a higher bracket than usual. At a certain point, your other deductions start to get phased out and all kinds of other nasty things happen. So, it really costs you more than 15%.
Thanks, at least I know what to prepare for. They really get you! It's really funny how they hand out welfare like candy, but just try to make an honest dollar. Thanks again!
Quote:If I understand correctly, the maximum gain is 15 percent except on the depreciation I've claimed which would be 25%?
anthonyb,
The depreciation ALLOWED is recaptured at 25%. If you claimed less than allowed then you gave the IRS more taxes than you needed to. If you claimed more than allowed, then the excess is taxed as ordinary income.
I'll have to check that out. I think I used straight line depretiation method, MACRS? I looked back through my taxes and was hoping that I screwed up didn't take depreciation but it wouldn't have made any difference because I would have been paying taxes on it then if I hadn't.