Simple Capital Gains Question
I understand capital gains. Mainly, short term capital gains are 28% and long-term are 15%. Primary residence after 2 years is exempt to 250k for single, and 500k for married. You can only use your exemption once every two year.
But! What about state taxes? I will be selling a primary residence in May and at that time will be eligible for the two year exemption on my 165 capital gain. But what about DC taxes of 8.75%... will I still owe that amount?
Thanks for any comments.
Thanks New Kid. In a related question, on non-exempt gains...federal short term capital gains are taxed at 15% but, in general, do states usually just have one capital gain rate or do those rates get reduced as well?
Thanks
Federal short term capital gains rate is the same as your ordinary income tax rate. If you are in the 28% tax bracket, then your short term capgain rate is 28%.
In my limited experience, states that have a personal income tax use the same tax rate for all income. Some states may exclude a certain portion of your capital gains from your income before taxes, then apply the state tax rate to all your remaining income.
Thanks New Kid. And for correcting me....I meant to say that long-term fed. cap gains are 15%.
I am not sure if I follow your two posts. In your first post you suggest that most states follow federal cap. gains exemptions without knowing the specific for each state. Then, in your second post you discuss capital gains as taxable under state income taxes. Does this mean that states consider capital gains as regular income not as a taxable gain.
Finally, am I mistaken that the maximum short-term capital gain is 28%? I thought that I had read that but if short-term cap. gains follow your regular tax bracket then I would assume they could be higher...up to 33%, right?
New Kid,
I bow to you. It clears this up. We have appreciation but not like some of our neighbors. We will be well under both the 250k single and definitely the 500k married.
Regarding your last example about flip income..does this mean a flipper would pay X+15% (with X being the appropriate tax rate for that income and the 15% being FICA/Self-employment taxes?). This essentially brings flip income to roughly 45%, correct?
Thanks.
Yes, but just for the federal taxes. State taxes would be on top of the federal tax bite.
NewKidintown2
I really have to give it to you, you really know your stuff.
Darryl-Ca[ Edited by Darryle-CA on Date 08/19/2005 ]
Quote:
On 2005-08-19 11:05, AndrewDC wrote:
New Kid,
Regarding your last example about flip income..does this mean a flipper would pay X+15% (with X being the appropriate tax rate for that income and the 15% being FICA/Self-employment taxes?). This essentially brings flip income to roughly 45%, correct?
Thanks.
I have a related question regarding this 15% FICA/Self-employment Tax on flips.
If you have ALREADY made 100k for the year (w-2 income), and thus are over the limit for social security contributions, do you STILL get hit for this 15% tax?
Or is this only for people who make less than 100k (or 93k, or whatever the limit is this year...)?
Totally fair question. That was the question my mother-in-law had when I was "flipping" out about flipping taxes. Does it even apply if you have already made the max. contributing amount?
Venator64
Any ordinary income above $90k is taxed at your regular tax rate plus 2.9%
So even a flipper who is classified as a dealer vs. investor, will only pay an additional 2.9% instead of the full 15% of FICA taxes after the first 90k?
So in essence, my previous post (X+15)=~45% taxes for flipping is only for flippers making 90k or less from flipping as their only source of income. If my wife and I make over 90k from our jobs, then our flipping income is taxed at (X+2.9)=~35% taxes. Right?[ Edited by AndrewDC on Date 08/19/2005 ]
Andrew,
Flippers ARE dealers.
You and your wife can not combine your incomes to reach the maximum social security taxable income.
If your personal income subject to social security taxes is already at $90K , then you have reached the social security taxable income cap. Income above the cap is exempt from additional social security taxes, but not from the medicare tax.
Your wife would also have to reach her own social security income cap before any additional income she makes is exempt from social security income taxes.
Thanks! Do you have to document your intent somewhere?