Tax Increase May Make 2010 A Better Year To Sell
July 27th, 2010 categories: The Market
Lost amidst the hubbub of health care reform and financial overhauls has been the fact that if the President and Congress don’t act, taxes rates will be going up. Ironically in the last week, the New Times and Wall Street Journal have both published articles concerning the looming battle.
“If no tax legislation is passed, all the major tax reductions passed under President George W. Bush in 2001 and 2003 will expire, with rates reverting overnight on Dec. 31. The top marginal income tax rate, for example, would go back to 39.6 percent from 35 percent now, with corresponding increases in rates for lower income brackets.” CLICK HERE TO READ THE ENTIRE NEW YORK TIMES ARTICLE
“Pressure is growing on the administration from a small number of Democratic lawmakers to extend all the Bush cuts, which include taxes on investment income and capital gains.” CLICK HERE TO READ THE ENTIRE WALL STREET JOURNAL ARTICLE
Given the majorities that the Democrats have in the house and senate, it is very possible that the Republicans will not have the votes to stop the automatic increase in taxes. If no extension of the current law is made the capital gains tax will raise from 15% to 20%. If you are thinking about selling a Honolulu house or condominium, by selling and closing in 2010 you should lock in the lower rate (providing the sneaky guys in DC don’t make a retroactive law). On a sale of $600,000, if the entire amount of the sale is capital gains, closing your sale in 2010 could save you $30,000!
Time is short! An average closing time is 45 days which means you would want have your property under contract by November 15th, at the latest! If you would like to investigate getting sold this year, call me at 808-398-3220.
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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.”
CLICK HERE TO READ THE ARTICLE
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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Obama & McCain on Capital Gains Taxes and Their Impact On Honolulu Real Estate.
September 2nd, 2008 categories: Rants & Riffs
The current Federal capital gains tax rate reaches a maximum of 15%. Add this to the State of Hawaii’s capital gain rate and the combined rate becomes 22.25%. Tax professionals have told me that this is a 70-year low! George Bush lowered it from the 28% Federal rate (a total of 35.25% combined) under Bill Clinton. I know what you are thinking, “Why is Keahi going here?”
Here is the answer. A funny thing happened to me this week as I watched coverage of the Democratic Convention. As I watched George Bush get blamed for everything from acne to global warming, I decided to start looking into the policies of each presidential candidate to determine, in my own way, how Obama and McCain might affect Honolulu real estate and our country. You may find that this rant is the beginning of a series looking into their policies (Obama vs. McCain). I also realize that I may make a few of you unhappy, but damn political correctness and “Viva” freedom of speech! Anyway, where do the candidates stand? Read the rest of this entry »
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