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Posted by Dan on November 7, 2006, 8:19 am
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Ok here's the deal, I sold an investment property last year.
I had owned it for about 1.5 - 2 years. Everything I read
online said that long term capital gains are taxed at 15%.
When I went to my accountant (who is actually a very
reputable account in my workplace) they told me that the
amount of taxes i pay on that gain depends on my tax bracket
and that the gain would be added in to my income for the
year. So... I assume that I paid a significant amount more
since im in 28% bracket.
Now I sold another investment property this year, same deal,
held for over a year. When I go back to the accountant, do
I thank them for doing every right last year, or toss them
my 2005 return and tell them to get busy re-doing it? ;)
Thanks,
Dan
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Posted by Paul Thomas, CPA on November 8, 2006, 2:44 am
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> Ok here's the deal, I sold an investment property last year.
> I had owned it for about 1.5 - 2 years. Everything I read
> online said that long term capital gains are taxed at 15%.
> When I went to my accountant (who is actually a very
> reputable account in my workplace) they told me that the
> amount of taxes i pay on that gain depends on my tax bracket
> and that the gain would be added in to my income for the
> year. So... I assume that I paid a significant amount more
> since im in 28% bracket.
>
> Now I sold another investment property this year, same deal,
> held for over a year. When I go back to the accountant, do
> I thank them for doing every right last year, or toss them
> my 2005 return and tell them to get busy re-doing it? ;)
Long term capital gains are taxed at 15% maximum. It's
possible that you misinterpreted what the guy told you
earlier. The only reason these gains would be taxed at
regular rates is if this is your business, the business of
buying and selling real estate.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Harlan Lunsford on November 8, 2006, 3:03 am
Please log in for more thread options Dan wrote:
> Ok here's the deal, I sold an investment property last year.
> I had owned it for about 1.5 - 2 years. Everything I read
> online said that long term capital gains are taxed at 15%.
> When I went to my accountant (who is actually a very
> reputable account in my workplace) they told me that the
> amount of taxes i pay on that gain depends on my tax bracket
> and that the gain would be added in to my income for the
> year. So... I assume that I paid a significant amount more
> since im in 28% bracket.
>
> Now I sold another investment property this year, same deal,
> held for over a year. When I go back to the accountant, do
> I thank them for doing every right last year, or toss them
> my 2005 return and tell them to get busy re-doing it? ;)
Without actually seeing your 2005 return it's impossible to
say whether or not it was done correctly. I'm betting
however that it was.
As for the tax rate, 15% is not necessarily the capital
gains rate; it could be as low as 5%, depending on your
income. But the tip off is this: the gain was reported on
schedule D, and on a worksheet somewhere is the proper
calculation. Check your file copy given you by the
preparer. He DID give you a copy, right?
ChEAr$,
Harlan Lunsford, EA n LA
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bob Sandler on November 8, 2006, 3:03 am
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> Ok here's the deal, I sold an investment property last year.
> I had owned it for about 1.5 - 2 years. Everything I read
> online said that long term capital gains are taxed at 15%.
Long-term capital gains on most types of property are taxed
at a rate of either 5% or 15%, depending on your tax
bracket.
> When I went to my accountant (who is actually a very
> reputable account in my workplace) they told me that the
> amount of taxes i pay on that gain depends on my tax bracket
First of all, even the tax rate on long-term capital gains
depends on your tax bracket. If you are in a low enough
bracket, some or all of the gain will be taxed at a rate of
5%. So it is true that the amount of tax depends on your
bracket. That doesn't mean it's not being treated as
long-term capital gain, or that it's being taxed at the same
rate as other income.
Furthermore, it is possible that not all of the gain on the
property is long-term capital gain. You didn't say what the
property was, but I am assuming it was land, possibly with a
building on it. If you took, or could have taken,
depreciation on the building or on some other part of the
property, then some of the gain would be taxed as ordinary
income.
> and that the gain would be added in to my income for the
> year.
"Added to your income" and "taxed as ordinary income" are
not the same thing. All of your income, of any type, is
added together to determine your total income and your
Adjusted Gross Income (AGI). This does not mean that all of
that income is taxed at the same rates. Different rates are
applied to different types of income, even though all the
income is included in the total.
> So... I assume that I paid a significant amount more
> since im in 28% bracket.
You may have, in effect, paid somewhat more than 15%, even
on the part of the gain that is treated as long-term capital
gain, but not because it was taxed at 28%. The direct tax on
the long-term capital gain is calculated at the 15% rate.
But the gain does increase your AGI, and the higher AGI
could reduce or eliminate various deductions and credits
that are affected by AGI. Because of the side effects of the
higher AGI, it is quite possible that the gain caused your
total tax to increase by more than 15% of the long-term
gain, even though the 15% rate was applied to the gain
itself. You could say that the effective rate on the
long-term capital gain is somewhat higher than the nominal
rate of 15%.
> Now I sold another investment property this year, same deal,
> held for over a year. When I go back to the accountant, do
> I thank them for doing every right last year, or toss them
> my 2005 return and tell them to get busy re-doing it? ;)
You could ask him or her to go over your 2005 return with
you and explain how the income from the sale was reported
and how the tax was calculated. It would be better to do
that now, rather than at the height of the tax season.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Arthur Kamlet on November 10, 2006, 2:21 am
Please log in for more thread options >> Ok here's the deal, I sold an investment property last year.
>> I had owned it for about 1.5 - 2 years. Everything I read
>> online said that long term capital gains are taxed at 15%.
> You may have, in effect, paid somewhat more than 15%, even
> on the part of the gain that is treated as long-term capital
> gain, but not because it was taxed at 28%. The direct tax on
> the long-term capital gain is calculated at the 15% rate.
> But the gain does increase your AGI, and the higher AGI
> could reduce or eliminate various deductions and credits
> that are affected by AGI. Because of the side effects of the
> higher AGI, it is quite possible that the gain caused your
> total tax to increase by more than 15% of the long-term
> gain, even though the 15% rate was applied to the gain
> itself. You could say that the effective rate on the
> long-term capital gain is somewhat higher than the nominal
> rate of 15%.
Other things that could incrase your effective tax rate are
social security income, which might move from nontaxable to
85% of social security becoming taxable, and adding to AGI
(See above.)
And though L-T Capital Gains are taxed at 15% for AMT, a
large L-T Gain can generate AMT thereby adding to your tax
bill.
__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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