SHOULD I PAY CAPITAL GAINS TAX NOW?
Posted by Bob Yale on Mon, Jun 16, 2008 @ 11:22 PM
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.