One of the “unknowns” in the real estate investing world is the topic of caital gains… in particular… the capital gains tax rates that you and are are subject to.
Truthfully… I’m not sure why I didn’t write a post about this earlier… afterall, I come from the world of tax planning and am the VP of a company who helps sellers of highly appreciated assets defer capital gains taxes.
One huge question that I field from sellers everyday both on this website and at the tax planning firm is, “What are the capital gains tax rates?”… “What will I owe in capital gains taxes?”
The second question is a bit tougher to answer without knowing specificis (I can go over specifics if you want me to… let me know in the comments area), but the first question is pretty simple.
Here we go… to make it simple to read, I’ll just post a chart or two below and get out of your way.
Keep in mind that with the new Democratic Congress, it is likely that capital gains tax rates will rise above the current 15% federal rate. So the rates below are as of today.
Something my lawyers make me say:
The information on this page is not meant to be tax advice nor should it be taken as gospel. Consult your own tax advisor about your specific situation. The numbers below are accurate to our knowledge, but hey… we do make mistakes. Check with your tax advisor about the actual capital gains tax rate applicable to your situation.
Federal Capital Gains Tax Rates – As of December 2012
|Type of Capital Asset||Holding Period||Tax Rate|
|Short-term capital gains (STCG)||One year or less||Ordinary income tax rates up to 35%|
|Long-term capital gains (LTCG)||More than one year||5% for taxpayers in the 10% and 15% tax brackets|
|15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets|
|Collectibles||One year or less||STCG tax rates up to 35%|
|Collectibles||More than one year||28%|
|Small Business Stock Gains (Section 1202)||More than five years||28% on the gain not excluded|
|Real Estate Main Home||One year or less||STCG|
|More than one year||LTCG taxed at 5% or 15% after any exclusion amount www.thereibrain.com|
State Capital Gains Tax Rates as of 2007
|If you see any errors (don’t think there are any…) please shoot me over the correct info.
Visit www.theREIbrain.com for more quality information like this.
|State||Top Marginal||Capital Gains
|Alaska||0||0||0||No state income tax|
|Arkansas||7||7||4.9||Capital gain rate is 70% of state tax rate for long-term gains|
|Colorado||4.63||4.63||4.63||Allows $1,200 ($2,400 married) credit for capital gains; no tax on capital gains for in-state businesses. Property bought before 1994 or held for 5 yrs has no CO capital gains tax|
|Florida||0||0||0||No state income tax (high transfer taxes)|
|Idaho||7.8||8.2||7.8||60% reduction in capital gains provided for cap gains produced in Idaho|
|Massachusetts||5.3||12||5.3||Flat rate; long-term gain taxed at lower rates based on length of time security has been held|
|Nevada||0||0||0||No state income tax|
|New Hampshire||0||0||0||State income tax on dividends and interest only|
|Rhode Island||5.99||5.1||5.99||25.5% federal tax liability for income and cap gains. State rate applies to federal tax liability.|
|South Dakota||0||0||0||No state income tax|
|Tennessee||0||0||0||State income tax on dividends & interest only|
|Texas||0||0||0||No state income tax|
|Vermont||8.95||4.8||8.95||24% federal tax liability for income and cap gains. State rate applies to federal tax liability.|
|Washington||0||0||0||No state income tax|
|Wyoming||0||0||0||No state income taxVisit www.theREIbrain.com for more information like this.|
There you go!
If your transaction applies to the capital gains tax rules in a state with ZERO capital gains tax… CONGRATULATIONS!
If not… either get ready to buck up and fork over a ton of cash to Uncle Sam or start looking for capital gains deferral / reduction options right now before its too late.
Post a comment below if you have questions about some capital gains deferral options and I’ll try to answer them in another post.