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Capital Gain Taxes – The Same for Now

Toward the end of 2010, many people wondered what would happen to capital gain tax rates on January 1, 2011. Some even scrambled to close the sale of property before the end of the year. As it turned out, Congress extended the capital gain rates in mid December; at least for two years. The following is a brief summary of portions of the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 (not surprisingly referred to as “the extension of the Bush Era Tax Cuts”) which are likely to impact real estate investors.

• Capital Gain and Dividend Rates – Current rates were extended for two-years for all taxpayers with a maximum rate of 15% for both.
• Personal Tax Rates – Current rates were extended for two-years for all taxpayers with the top rate remaining at 35%.
• Social Security Tax – The employee tax rate of 6.2% on the first $106,800 of wages drops to 4.2% in 2011.
• Alternative Minimum Tax – Current exemptions were extended for all taxpayers for two-years.
• Estate Tax – An exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years; the exclusion will become indexed beginning in 2012.
• Gift Tax – Like the Estate Tax, a Gift Tax exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years, with the exclusion being indexed beginning in 2012.
• Other Extensions – The $1000 child credit; an additional standard deduction for real-estate taxes; extension of 15-year cost recovery for certain leasehold improvements, restaurant buildings and qualified retail improvements (through 2011); and the extension of various energy credits (through 2011).

Although the legislation provides some certainty for two years, we may find ourselves questioning our future rates again in 2012. Since that is also an election year, it may be interesting!

We, at IPX1031®, pride ourselves on not only being the industry leader in service and security, but we also strive to help our clients and their advisors keep current on the most recent tax law changes.

When you choose IPX1031^® as your Qualified Intermediary, you can be confident that your exchange will be handled expertly and that your funds will be safe, secure, and available when needed. Please call us when we can be of service, or if you have any questions.

To schedule a seminar, please contact:
James Callejas, CES®, Assistant Vice President, Account Executive
Direct: 415-640-0794 James.Callejas@ipx1031.com

James’ seminars are available for continuing education credit with the CA Department of Real Estate, CA Board of Accountancy (CPE) and CA State Bar (MCLE).

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