Capital Gain Tax Increases Coming

Services for Real Estate Pros with Iowa Equity Exchange

Look out ahead, folks! Regardless of what you think of the health care "reform" that passed the House of Representatives yesterday (and I guess the quotes make it clear what I think of it), it will have a huge impact on those of us who call ourselves investors.Iowa Equity Exchange

Within the thousands of pages of legislation, there is a small provision with a significant effect. It is a 3.8% "Medicare payroll tax" on capital gains and other investments. This increases the capital gain rate from its present 15% to 18.8%. **Please see 4/8/10 update at bottom.** Bad, but perhaps tolerable, you may think. However, in addition to this 3.8% surcharge, at the end of 2010 the capital gain rate is set to increase from 15% to 20% due to the expiration of the Bush tax cuts. Combined with the 3.8% Medicare boost, that results in a new capital gain tax rate starting January 1, 2011 of 23.8%! **Please see 4/8/10 update at bottom.** If you do the math, you'll see that this represents a almost a 60% increase in the capital gain rate versus the present 15%!

Today I have to tell you that if you were ever thinking of selling your investment real estate without using a 1031 exchange, now might be the time to do it. I don't believe that you will be able to avoid the 3.8% surcharge; that will likely go into effect as soon as President Obama signs the bill, which appears to be scheduled in the next day or two. **Please see 4/8/10 update at bottom.** But you can avoid the 5% increase that happens at the end of 2010 if you close prior to December 31, 2010. Of course, you can avoid paying all of those taxes today by utiliziing a Section 1031 exchange.

If you have questions, please feel free to get in touch. This is a fluid situation, so I won't claim to have all of the answers, but I'll do my best to find out for you.

**4/8/10 - I've been trying to get definitive word on when the 3.8% increase goes into effect without any luck until today. I broke down and read the bill itself for the information. (Not the entire 3,000 pages, mind you; just the pertinent section.) The increase takes effect on 1/1/2013, so it is not quite as onerous as I originally suspected. Some solice, I guess.


Please consider IOWA EQUITY EXCHANGE as your trusted source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Iowa Equity Exchange

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.


Copyright © 2010 By Ken Tharp, All Rights Reserved. * Capital Gain Tax Increases Coming * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

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