Advantage Software LLC         What is your Capital Gains Tax Rate?
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       Capital Gains Tax Rates
 
        
  For income property held more than one year, investors in a 15% tax bracket or less will be taxed at a 0% long term capital gains rate.  Investors in a 25% to a 35% tax bracket will be taxed at a 15% capital gains tax rate and those in a 39.6% tax bracket will be taxed at a 20% rate.  If you are single and make more than $200,000 or married filing jountly making more than $250,000, you will also be required to pay an additional 3.8% surtax on investment income.

Note that the portion of your gain from the sale of an income property that is attributable to depreciation will be taxed at a different rate, an unrecapture rate.  Investors in a 10% tax bracket will be required to pay a 10 % unrecapture tax rate for that portion of their gain that is attributable to depreciation.  Those in a 15% tax bracket will need to pay a 15% unrecapture rate and those in a 25% tax bracket or greater will pay a 25% unrecapture tax rate.

Unrecapture depreciation taxes work like this.  The total of all depreciation taken on the building during the period that you own your income property plus all accumulated depreciation taken on any improvements to the buildings are subject to the unrecapture depreciation tax rates above when you sell your income property.  Only that portion of your gain from the sale that is not attributable to depreciation would be taxed at the capital gains tax rates above.

Example:  If you are in a 15% marginal tax rate, the capital gains that you realize from the sale of an income property is added to your income to determine the capital gains tax rate and the unrecapture tax rate that will be applied to your gain.  That portion of your gain which is in a 15% tax bracket after adding the capital gains amount to your income will be taxed at a 0% capital gains rate and a 15% unrecapture rate and that portion of your gain that is in a 25 % tax bracket after adding the capital gains amount to your income will be taxed at a 15% capital gains rate and a 25% unrecapture rate.  Approximately 75% of the tax filing population are in a 15% tax bracket.  This will therefore impact many real estate investors when they sell income property.  If you are in a 15% tax bracket and are considering selling an income property, be sure to go over how your gains will be taxed with your tax adviser.

 
 
 
 
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Note that if you paid a sales commission on the sale of your income property, your gain or profit from the sale would be reduced by the amount of the sales commission.

For income property held less than one year, your gain on the sale of a property will be taxed at ordinary income tax rates.  To determine at what rate your income property sale will be taxed at, click on the link below to look up your marginal income tax rate.   Income Tax Table

The On Target real estate investment software applies your capital gains rate and unrecapture depreciation tax rate to the proceeds from sale on the Sale of Property report.  To order On Target for just $99.95 click on   Purchase Software   To learn more about the On Target software, go to  Software Features  . The On Target real estate software includes a 30 day money back guarantee and free support.

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