Long V. Short Term Cap Gains In Calif.
What is the timeframe for longterm v. shorterm capital gains tax in California?
I am putting some rental props on the market that I purchased in 2002. Is there a timeframe to hold for investors to get the better tax rate in California? I am just under 2 years but can hold off the sales if it will make a significant difference.
I am considering 1031 exchange on some of the funds but I want to cash out also.
Thanks for the input,
Noel
[addsig]
2 years profesional and personal. BTW just call a CPA and ask them they generally don't mind giving out free advice it is an opportunity for them to market themselves. Which they aren't to good at.
Well, I thought I'd post the question first here before calling my accountant.....cause he's a bit of a weenie and I don't like talking to weenies if I can avoid it.
Anyhooo. Well. If anyone is interested - I did finally call the weenie today and this is the weinerschnitzel in California:
2 years personal,
1 year rental/investment
Hmmm. I thought. That's good news, then. And then my little hot dog added that it's 28% short term and 20% long term.
And I thought, well, hell. It's worth a year to save 8% 'specially since I've owned these particular puppies for nearly 2. Hot damn, like I struck fools gold. So, I say sell them suckers!
Hee haw!
Noel
[addsig]
Something sounds off here. I think that capital gains taxes are the same in every state. As I understand they just dropped Long term capital gains to 15%, and short term gains are whatever tax bracket you're in. Not sure, but that's what I think they are. Anyone want to help us both clarify???
I agree. These numbers sound like the federal capital gains tax rates that were in effect prior to 2003. In the context of your state income taxes, they do not sound right. Maybe they are, but we don't know the context. For example, is your accountant telling you that only 20% of the profit on your rental income property is CA taxable income? What is the context for these numbers you got?
If you sell this year, the maximum federal long term capital gains tax rate is 15%, and the maximum California income tax rate is 9.3% (unless the CA legislature enacts a tax increase to get the state out of a fiscal crisis).
This puts your maximum combined federal capital gains tax and state income tax just under 25%. Since you are talking about rental income property, I believe you fall under the one year rule.
If the one year rule means that only 20% of your investment rental profit is taxable income on your state return, then your effective state tax rate on your sale profit is a little under 2%. Add this to your federal capital gains tax rate, and you have a combined state and federal capital gains tax under 17%.
Go back to your accountant to clarify this point.[ Edited by DaveT on Date 02/10/2004 ]
I'd try a differnent accountant and see if they agree.
Thanks for the input. I agree that it is time to fire the weenie accountant and find someone who is current with the numbers. Kinda scary to think that I used this guy at all.
Thanks again,
Noel