A sobering article in today’s Forbes, explaining how
higher taxes are certain no matter who
wins the election, makes several important, time-sensitive points that could affect every real estate investor’s bottom line and ALL investors should heed:
For those who want to sell investment property at the 15% long-term capital gains rate, now might be a good time. There may never be another chance.
Long-term capital gain rates will jump from 15% to 23.8% after 12/31/12. That’s the highest rate since 1997. That means you’ll put $83,800 less in your pocket for every $1,000,000 of your sale price.
That 8.8% increase is made up of two components: (1) after 12/31, the best rate on long-term gains goes from the current 15% to 20%, and (2) capital gains will incur an additional 3.8% Medicare tax starting 1/1/13.
Even if Romney gets elected, his promise to repeal the 3.8% surtax, along with the rest of Obamacare, may be difficult to push through Congress.
Consult your tax advisor to get more details and determine how the above may affect your personal situation. However, one thing is crystal clear: if you’re an investor thinking about selling investment property within the next year (or if you’re analyzing a potential new investment purchase now that you plan to sell after December 31, 2012), you should immediately review your plans in light of the above taxes. These higher taxes could make a huge difference to your net profit and, considering how long it takes to market your property, find a buyer, enter into contract and close your sale, you should start the process IMMEDIATELY if you want to close before December 31, 2012.
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