Obama, Capital Gains & Your Honolulu Real Estate!
November 7th, 2008 categories: For Sellers, Rants & Riffs
Now that the smoke has settled from our recent Presidential election, it is time to start considering its impact Honolulu real estate sales. Our new President has a strong party majority in both houses of Congress and, therefore, it is reasonable to believe that he will initially have the ability to pass legislation that is favorable to his past beliefs. In March of this year, President Elect Obama was quoted in the New York Post saying the following.
“I haven’t given a firm number,” Obama told CNBC’s Maria Bartiromo, speaking of how much the levy would rise over the current rate of 15 percent. He “guessed” it would be “significantly lower than” the 28 percent it was under President Bill Clinton.”
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So how does this impact long-term owners of highly appreciated Honolulu real estate? It may not happen, but, if I were a betting man, I believe it is safe to say that the long-term capital gains rates will be going up! If you are planning on selling your property within the next year and part of the plan includes cashing out (not deferring the capital gains through a 1031 Exchange or Installment Sale), then you may want to get your property sold sooner rather than later. By selling sooner, you do two things.
Punahou President's home
1. You GROSS more money. I believe values in the short term will incrementally drop. If I am right, you will get a higher price in the next 3 months, than if you wait six to nine months.
2. You NET more money. Assuming that you sell before the capital gains rate is changed, then your sale would be taxed at a Federal capital gains rate of 15 percent. This means that for every $100,000 in long-term gain you would pay $15,000 toward capital gains taxes. If the rate were changed to 28 percent, then you would pay $28,000 in long-term Federal capital gains taxes. This is a difference of $13,000 per $100,000! Since most owners of Honolulu houses and condos have significantly more than $100,000 in gain a shift like this would milk a great deal of money out of your wallet! The wild card would be if Congress decides to make the law change retroactive! No one can predict what date they would use to make any new law effective, but you have to know it could happen.
I report this to give you the heads-up. If you would like to discuss an outright sale or a IRC Section 1031 Tax Deferred Exchange, feel free to call me at 808-737-2093 or toll free at 877-737-2093.
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I’m a new investor here in S. Florida. This is exactly the type of information I’ve been looking for, info like this kinda helps you plan out what ways you should go about with your investing plans. Asset protection and tax information will be at an all time high I believe.
http://www.inexpensiveinvestinginflorida.com/
Thanks
I’ve been engaged in taxations for lengthier then I care to acknowledge, both on the individual side (all my working life history!!) and from a legal standpoint since passing the bar and following tax law. I’ve offered a lot of advice and corrected a lot of wrongs, and I must say that what you’ve posted makes perfect sense. Please persist in the good work – the more people know the better they’ll be armed to cope with the tax man, and that’s what it’s all about.