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How Capital Gains Tax Differs in Commercial Property


Posted: April 19, 2018 by Anna Jotham

For commercial property owners, capital gains tax on investment properties are no small concern. CGT is a tax that is levied against the profit earned from selling or disposing of certain assets, and that includes commercial property. The rate of tax an owner pays on a commercial property sale differs depending on a number of factors.

 

Understanding Capital Gains Tax on Investment Property

According to www.realtor.com, “How Much Is Capital Gains Tax on Real Estate? What Homeowners Need to Know to Avoid It,” if an owner is selling an investment they’ve held on to for more than a year, they will be taxed at what is known as the long-term capital gains rate. If it’s an asset they’ve held on to for less than a year, according to “2017-2018 Capital Gains Tax Rates – and How to Avoid a Big Bill,” on www.nerdwallet.com, it’s considered a short-term capital gain and is taxed as ordinary income.

Capital Gains and the New Tax Code

From there, long-term capital gains rates then depend upon a number of factors. Under the latest incarnation of the U.S. tax code, the capital gains tax has a top rate of 20 percent, in addition to 3.8 percent for net investment income tax. That’s according to “Will Your Taxes Go Up or Down Under the New Tax Rules?”, on www.nerdwallet.com. It’s important to note that under the overhaul of the tax code, the capital gains tax top rate remains unchanged, according to the article. However, under the new tax code capital gains are actually defined differently. In the past, certain dividends and long-term capital gains applied to specific tax brackets, now they apply to income thresholds, according to, “6 Things Investors Need to Know About the New Tax Plan,” on www.nerdwallet.com. That means:

  •          a zero percent rate applies to individual filers who earn up to $38,600 and up to $77,200 for those filing jointly
  •          a 15 percent rate applies to individuals earning between $38,601 and $425,800 and those filing jointly who earn between $77,201 and $479,000
  •          a 20 percent rate is applied to individuals earning more than $425,800 and more than $479,000 for those filing jointly


Consult Your Tax Advisor or Tax Code Expert on Your Capital Gains Tax Obligation

Capital gains taxes may be of concern to you if you own and are considering selling commercial property, and tax codes can be confusing. Consult your tax advisor or tax code expert if you have questions about how capital gains taxes may impact you.




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