Many Investments are Eligible for Tax Rule
Author: Jenny Shilling
Regardless of your tax bracket, long-term capital gains are only taxed at 15 percent federally. This special tax treatment applies to just about any investment that you make that you hold for at least one year. While stock and mutual fund investors have benefited from this for years, many other types of investments can also take advantage of this tax rule:
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The profit on the sale of a personal residence, including vacation homes and time-share interests is only taxed at 15 percent.
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Profits on the sale of put and call options or other derivative investments held in your personal account. Be careful to ensure that the derivative that you buy has a life of over one year, though.
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Non-collectible personal autos or other personal property items. While most of these items go down in value, some, such as jewelry, can go up in value.
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Closely-held stock or ownership shares of LLCs or LLPs.
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Land or real estate held for investment purposes by you, your family, or a company of which you own a portion.
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Country club or golf club memberships.
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Business assets held by a sole proprietorship, general partnership, LLC or S corporation that are sold for a profit.
While this favorable capital gains tax treatment can be a windfall for many investors, it is not without some danger. Some of the deductible items identified here can also be subject to special recapture taxes on any part of their value that was written off as amortization or depreciation. in addition, profits on the sale of collectible items are also taxed at a higher rate.
Due to these complexities, the best thing to do is to involve a tax planner as early as possible before you make investments or sales of valuable items. The Tax Office, Inc. can help you to properly categorize the sale of your assets and ensure that you take full advantage of the extremely low capital gains tax rates. Contact us today to learn more.
