Posted by Ed Copp (OH) on December 12, 2006 at 18:01:15:
You will most likely have a new understanding.
Capital Gains/seeking to verify - Posted by Kevin
Posted by Kevin on December 10, 2006 at 13:44:24:
I’m selling an investment property I bought a couple years ago. Bought it for $15,000, I anticipate selling at approx. $74,000. I spent about $8,000 in improvement costs and expect about $4,080 in realtor fees and $2000 closing costs. I also used $20,000 from a line of credit on the home to purchase another.
My accountant said to expect to pay about $2300 in capital gains. My figures were much higher. Can someone verify that my accountant’s figures may be correct?
Thanks
Re: Capital Gains/seeking to verify - Posted by Dave T
Posted by Dave T on December 10, 2006 at 14:18:31:
Your net profit from appreciation alone is about $45K. At a maximum capital gains tax rate of 15%, you could pay as much as $6750 capital gains tax.
If you are in the 15% tax bracket or lower, then your capital gains tax rate starts at 5% for the amount of gain that keeps you in the 15% bracket. Whatever amount of capital gain pushes your taxable income into the 25% bracket, will be subject to the 15% capital gains tax rate. If all of your capital gain keeps you in the 15% tax bracket, then your capital gains tax on
could be as low as $2250.
Additionally, unrecaptured depreciation will be taxed at 25% if you used this property for the production of income (rental). You don’t tell us how you used the property during your ownership, so this may not apply.
You have a lot of variables here and you don’t give us enough information to give a definitive response. Best that you go back to the accountant and ask how he/she arrived at $2300. Ask if depreciation recapture is also in play.
Re: Delete the above - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on December 10, 2006 at 14:24:29:
It is wrong.
Your accountant is correct.
NO, you are wrong… - Posted by Sorry Charlie Wrong Again
Posted by Sorry Charlie Wrong Again on December 13, 2006 at 22:38:05:
IRS per www.irs.gov
"You may have to report capital gains and losses on Form 1040, Schedule D (PDF) . If you have a net capital gain, that gain may be taxed at a lower tax rate. The term “net capital gain” means the amount by which your net long?term capital gain for the year is more than your net short?term capital loss. The highest tax rate on a net capital gain is generally 15% (or 5%, if it would otherwise be taxed at 15% or less). There are 3 exceptions:
The taxable part of a gain from qualified small business stock is taxed at a maximum 28% rate.
Net capital gain from selling collectibles such as coins or art is taxed at a maximum 28% rate.
The part of any net capital gain from selling Section 1250 real property that is due to recapture of straight-line depreciation is taxed at a maximum 25% rate."
Re: Delete the above - Posted by Eric in FL
Posted by Eric in FL on December 13, 2006 at 09:32:34:
“The most expensive advice I ever got was free”. Interview accountants that own real estate and have engaged in investing for years. Every post has been incorrect.
Did I miss something? - Posted by Natalie-VA
Posted by Natalie-VA on December 11, 2006 at 12:28:13:
What was wrong with Dave’s answer?
–Natalie
Re: Yes you did - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on December 11, 2006 at 15:44:57:
Actually Dave did. It would help to look the info up. Dave thinks that the tax rate on capital gains is 15%. This is wrong. The amount of the gain that is taxed is 15%, while 85% of the gain is exempt. The taxing rate for the 15% that is taxed is your regular tax rate, not 15%.
Re: Yes you did - Posted by Natalie-VA
Posted by Natalie-VA on December 12, 2006 at 17:35:20:
Hi Ed,
It’s my understanding that the federal rate for long term capital gains is 15%. Short term gains are taxed at ordinary income tax rates. As far as splitting the gain by 85/15…I’ve never heard of that.
–Natalie