Real Estate and Capital Gains Tax Rates

I’ve been involved recently with a couple of sellers who are trying to determine whether or not they should go ahead and sell now, in a market that is 15-20% off in their respective neighborhoods, or wait it out and sell in a few years.  I know this is an issue that many sellers (with investment property) are currently dealing with so I figured we could look together at the pros and cons of selling now.

Currently long term capital gains rates are at 15% (5% for lower tax brackets but that probably excludes the vast majority of people owning investment real estate).  This is not a politically driven blog at all, but depending upon who’s in office come January ‘09 we could see capital gains rates increase drastically.  Capital gains rates are scheduled to go up after 2010, as I understand it, anyway unless legislation is passed to prevent the scheduled increases.

So, the decision is between selling now and missing out on future appreciation or waiting and risking paying a much higher rate on the gain due to increased capital gains taxes…

Obviously there is not a “one size fits all” answer to this equation.  It would depend upon a sellers financial situation, personal goals and interest in holding real estate long term.  However, that being said, my advice would in most cases be to go ahead and sell if you have a good place to park the $$ and receive a healthy return.

Thoughts, questions and comments, as always, are welcomed!

For another article on the subject matter click here and then click on the link for Capital Gains and Dividends at the bottom left.