Posted by JHyre in Ohio on November 19, 1998 at 06:03:31:
This is true but incomplete. Subject to a billion excceptions, depreciation in excess of straight-line is taxed at ordinary rates. The remaining straight-line portion is taxed at 25%. See IRC Sections 1245, 1250 and the new cap gains rules.
Posted by John OH on November 18, 1998 at 02:37:17:
I should know this - every investor should. What is the tax break on long and short term capital gains? What is the criteria for long vs. short? Thanks.
Posted by JHyre in Ohio on November 18, 1998 at 15:03:01:
Long-Term Capital Gain (i.e.- asset held 18+ months) is taxed at 20%, unless you are in the 15% income tax bracket, in whih case it is taxed at 10%.
Mid-Term Gain (held 12 - 18 months) is generally taxed at 28%.
Short-Term Gain (Held< 1 year) is taxed at ordinary rates.
ALL of the above rates are subject to “recapture” rules. If you sell certain types of property (including most real-estate) that were depreciated for tax purposes, the amount of gain from the depreciation is generally taxed at ordinary income rates.
For example, a building purchased for $100 and sold for $250 produces $150 in gain. If the building was sold by a non-dealer 2 years later, the gain is long-term capital gain and taxed at 20% except for recapture. Any depreciation on the building up to the amount of the gain is “recaptured” at ordinary tax rates instead of the more favorable capital gains rates.