Capital gains tax question

[Gregorian]

I've been dreaming about pulling off a miracle. I bought a piece of property, and I am hoping I can make a profit of 1.5 million off of it. I have owned it less than a year. I earn no income otherwise.
It looks like taxes on capital gains earned on property owned for under a year, is taxed at the same rate as personal income.
I had made plans on capital gains that were 25%, but suddenly I'm a bit confused about what the rate might be. Does anyone here know this stuff???

[silverlib]

1. I found a link

I hope it helps. I'm no pro, just trying to help this forum stay alive, as I think it's an important one. I hope this is helpful. It looks like good news for you, but I would recommended calling IRS to verify the information.

https://www.gainskeeper.com/glossary_CapitalGainsTax.html

Here's a <snip> from the link:


How Capital Gains Tax is Calculated

Short-term capital gains are taxed as ordinary income. Therefore, the nominal tax rate will be whatever tax bracket the investor is in.

The majority of people now only have two capital gains tax rates to worry about - 5 percent and 15 percent. Long-term capital gains are taxed at 5 percent for taxpayers in the 10 or 15 percent income tax bracket overall and 15 percent if taxpayers are in any other tax bracket. The long-term capital gains are included when figuring out the investor's tax bracket. However, the 5 percent or 15 percent rates do not apply to all long-term capital gains. Long-term capital gains on collectibles, some types of restricted stock, and certain other assets are instead subject to a minimum 28 percent rate.

It is important to note that corporate actions change the cost basis of a security. It cannot be assumed that the purchase price is the cost basis. It is important to track corporate actions because otherwise investors can significantly overstate capital gains increasing tax costs. They can also understate capital gains leaving them liable for back taxes, interest and other penalties.

[Gregorian]

2. Good and bad

Thanks. I got enough from that to do a bit more searching. I wish people would date stuff. Things change so much, I don't pay attention to undated articles.

The super bad news is that I would be in a very high tax bracket, I think (I'd need to confirm that with an accountant), if I sold in less than a year.

The good news (unless you are one of America's less than wealthy citizens) is that if I held it a year, capital gains is ONLY 5 percent. That is a crime. But great news if you want to make money.

Knowing that, I would get creative. Ie, a long escrow.

Now if I can only get someone to reply who knows the story how it works with respect to owning under a year. My guess is that my tax bracket would be that for someone earning 1.5 million. And that's somewhere around 35 percent.



Here's a link that might be as complete as any I've seen. Just in case anyone else has an interest in this-

http://www.bankrate.com/bos/itax/tips/20010305a.asp

[scruffy]

3. If you own it for less than a year . ..

it will be taxed as a short term capital gain - which will end up being the tax bracket for someone who has income of $1.5m . .. about as high as you can get!

If at all possible, you need to hold onto it for a full year - then it will be taxed as a long term capital gain at 15% federal, plus state taxes if your state has an income tax.

[Gregorian]

4. Got it!

Hey, good to have a new person on DU. Howdy!

Just as you posted that, I had finally found it. And you doubly confirmed it. So after 366 days of holding the property, I am at the 15% plus state tax.

As I searched, I found what looks like the elimination of capital gains taxes, in 2008. How they are going to do this and still have a place called America is beyond me.


Thanks again!

Now all I have to do is find that uberwealthy person to by my ranch. Come on, baby!!!!!!!!!!!!

[amazona]

5. don't get the problem

Don't have the act of sale until you have owned the property a full year. Doesn't actually sound like it's much of a problem. Believe you me, if you have to shift the timing because of taxes, anyone who can afford to pay $1.5 million for a property will understand because they've been there. If you have no luck, you can always roll the dice and hold out for a sale in 2008 -- it isn't exactly far away any more. 2008 minus 2005 is only three years last time I tested my subtraction skills. And hell it's already May.

[Gregorian]

6. Self delete

Never mind.

[amazona]

7. as a follow-up to your post

Would you mind sharing tips on how you find properties for investment? I wouldn't ask you for the exact address or location, just general suggestions. Thanks.

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