One Good Reason To Liquidate Your New Orleans Commercial Real Estate Now

In 2013 the long term capital gains rate is expected to increase by 58%, so get with your accountant and strategize. While taxes should never be the sole decision to acquire or dispose of commercial real estate – that decision should rely on the economic feasibility of the development – the long term capital gains tax for 2012 is only 15%, and with a government struggling to pay for a recession and wars, capital gains tax rates could go much higher over the next few years.

The 2012 capital gains rate is one of the lowest on record and has been in effect since 2003. You have to go back to 1934 to witness a previous era where capital gains tax rates were 15% or less. As shown below in the “Table of Historical Capital Gains Tax Rates Since 1913”,  rates have usually been much higher – such as in the late 1980’s when long term capital gains rates were 33% due to the Tax Reform Act of 1986. In 2013 the long term capital gains rate is expected to increase to 20%, plus a 3.8% Medicare Tax, plus Obama’s “Buffet Rule” may increase rates to 30% for millionaires. That increase from 15% to 23.8% is a percentage increase of 58%, so it commands a thoughtful plan.

If you expect your commercial property’s market value will not increase much over the next five years, it might make sense to sell now and pay the 15% capital gains tax rate, rather than sell for the same price in a few years and pay a higher tax rate. In finance terms, the opportunities you would miss by not having that money to reinvest in other projects over that five year period are called “opportunity costs”, and smart commercial property owners take into account the future value of any asset that might sit idle for several years. Here’s how it works: if you miss earning 5% on an asset valued at $1,000,000 today, you have lost $283,358 over 5 years, because the future value of an asset worth $1,000,000 today will be worth $1,283,358 in 5 years.

Click on the pdf below for a helpful summary from Putnam Company of most of the tax information you need to know: capital gains rates, individual and corporate income rates, retirement plan contribution limits, estate tax rates, social security amount taxed, and FICA tax limits. As always, see your accountant for tax advice.

Click Here For The 2012 Tax Rate Table From Putnam

TABLE OF HISTORICAL CAPITAL GAINS TAX RATES SINCE 1913

Year

Capital Gains Rate

1913-15
15%
1916
15%
1917
67%
1918
77%
1919-21
73%
1922
12.5%
1923
12.5%
1924
12.5%
1925-28
12.5%
1929
12.5%
1930-31
12.5%
1932-33
12.5%
1934-35
31.5%
1936-37
39%
1938-40
30%
1941
30%
1942-43
25%
1944-45
25%
1946-47
25%
1948-49
25%
1950
25%
51-64
25%
64-67
25%
1968
26.9%
1969
27.5%
1970
32.3%
1971
34.3%
1972-75
36.5%
1976-77
39.9%
1978
39%
1979-80
28%
1981
23.7%
1982
20%
1983
20%
1984-86
20%
1987
28%
1988-90
33%
1991-92
28.9%
1993-96
29.2%
1997-2000
21.2%
2001
21.2%
2002
21.2%
2003-05
16.1%
2006-07
15.7%
2008-09
15.4%
2010-12
15%
2013-on
25%
   
Sources: www.taxfoundation.org, www.visualizingeconomics.com,www.seekingalpha.com,www.forbes.com, www.CTJ.org

 copyright 2012. Louisiana Commercial Realty, LLC.

New Orleans commercial real estate.

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