Advertise with Us

Bookmark and Share

Capital Gains Tax- Changes In The Law And Emphasis On Enforcement

The amount of capital gains tax you pay depends on how long you have held on to an investment. Capital gains taxes become lower, if you hold an investment for more than one year. So if you are in the 35% tax bracket, you pay the same percentage tax on an investment, if you hold it less than a year, but if you hold it for more than a year, your capital gains tax is only 15%. However, taxes are not the same for all sorts of investment. Taxes of 28% apply to those who make profits on investments in coins, bullion, and art works. You must report all capital gains, but you are allowed to deduct capital losses only on your investment property, not your personal property.

The capital gains tax rates on the new budget go from a bottom rate of 5% for the low income bracket, up to 15%. In the year 2008 the bottom bracket is slated to go down to zero. This will lower taxes on corporate profits, which are taxed once when they are issued by the corporation, and a second time when they are taxed as dividends to the people who receive them.

In a report by the House Congressional Budget Office, there is concern that even though these tax cuts will increase spending and consumption in the short term; they will have negative long-term effects. They will lower long-term investment and savings, by diverting funds to quick spending.

Fears continue over the total evasions of capital gains taxes, both through offshore tax shelters and underreporting of capital gains. A Senate and a House bill both seek to make brokerage houses report more tax information to the Government. The goal of the bills is to stop investor’s ability to inflate their losses or minimize their gains when filing their taxes.

Home owners also do not have to pay any capital gains tax when they sell their home up to $250,000, or $500,000 for a married couple. Of course, you also get tax deductions for paying mortgage interest and property tax. The other rule is that you have to live in your home, or it has to be your primary residence for it to be exempt up to the limit for capital gains tax. Note also, that unlike the tax law before 1997, you can use this tax exemption whenever you sell your home a multiple number of times.