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If you have significant built-in gains in an investment or property, 2008 through 2010 might be a better time to recognize the gain for federal income tax purposes.
Ordinary Income Capital Gains Rate
Tax Brackets 2007 2008 2009 2010
10% 5% 0% 0% 0%
15% 5% 0% 0% 0%
25%-35% 15% 15% 15% 15%
Tax Brackets 2007 2008 2009 2010
10% 5% 0% 0% 0%
15% 5% 0% 0% 0%
25%-35% 15% 15% 15% 15%
Figure 1 summarizes the rates until 2010.
Maximum capital Gains Rates
For the 2007 calendar year, the maximum rate of tax on the adjusted net capital gain of an individual was 15 percent for individuals in the over 15 percent ordinary income tax bracket. For those individuals in the 15-percent and lower ordinary income tax brackets, any adjusted net capital gain that otherwise would be taxed is taxed at a 5-percent rate.
The 5-percent rate is lowered to zero for calendar tax years 2008, 2009, and 2010.
Tax Rates After 2010
Assuming there are no further tax changes and current laws are allowed to expire, for taxable years beginning after Dec. 31, 2010, for property held over one year, the maximum rate of tax on the adjusted net capital gain of an individual is 20 percent. Any gain from the sale or exchange of property held more than five years, and the holding period for which began after Dec. 31, 2000 that would otherwise have been taxed at a 20-percent rate, is taxed at an 18-percent rate.
The capital gains rates on 28-percent gain and un-recaptured section 1250 gain are the same in all taxable years, and the recapture provisions of sale of business or rental property remain taxed at ordinary income taxes.
Qualified Dividends
Under present law, dividends received by an individual from domestic corporations and qualified foreign corporations are taxed at the same rates that apply to net capital gain. This treatment applies for purposes of both the regular tax and the alternative minimum tax.
Dividend Tax Rates After 2010
Based on current law, for taxable years beginning after 2010, dividends received by an individual are taxed as ordinary income at rates up to 35 percent.
For Tax Planning and Tax Return Preparation Contact Farasat “Fred” Khawaja, CPA
The above tax information of capital gains and dividends is desgined as general information. You need to discuss with your tax advisor to determine the tax effect of any sale property or investments that you are considering.
By: Dallas CPA - Farasat Khawja
