SHOULD I PAY CAPITAL GAINS TAX NOW?
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What to do? Should I pay the 15% Capital Gain tax on my real estate investment now? Or should I exchange my gain into another investment and pay my taxes later?
This question doesn't bother everybody, but it does occur to those who own investment real estate. Since investment real estate is a catch-all term ranging from a small 3 decker apartment building in the inner city to raw land to retail buildings, office buildings, warehouses - any real property held for use in your trade or business, then a lot of Americans can ask this question. We've posted a separate article on tax deferred exchanges. This is a great way to sell a property that's appreciated in value and would expose the seller to a capital gains tax when sold. It allows the seller to roll all the sale proceeds into a replacement property and defer payment of the tax.
But some are now questioning whether they should sell now and pay the tax. Sound absurd? Not really. The federal capital gains tax is 15%, the lowest it's ever been. At this writing we don't know who will be president next year, but we've heard threats from various candidates to raise the capital gains tax rate next year. If that happens, then a question is raised as to whether the deferred tax would actually be paid in the future at a higher rate than 15%.
For more information about paying those taxes now or later, take a look at the attached article from Mark Van Ness, CEO of Sperry Van Ness. He's considering this same question on a personal as well as client level. Just click here.
Central Massachusetts Commercial Real Estate