WHAT ARE CAPITAL GAINS?

Capital gains are the profit made on an investment upon sale. They can be realized in the very short-term, after hours or days of holding an investment. Or in the long-term, years or decades after the original investment was made, which is most common in real estate.

WHAT AREN’T CAPITAL GAINS?

Capital gains are not the income you earn as an employee or from your business.

SHORT-TERM GAINS

Any gains made from an investment which was held for less than one year are recognized as ordinary income and taxed at your normal income tax rate.

LONG-TERM GAINS

Any gains made from an investment which was held for more than one year are recognized as a long-term capital gain and taxed at a lower rate.

LONG-TERM GAINS

Any gains made from an investment which was held for more than one year are recognized as a long-term capital gain and taxed at a lower rate.

HOW DO YOU CALCULATE CAPITAL GAINS?

In simple terms, capital gains are calculated by subtracting the basis (your original investment) from the sale price of a property.

HOW DO YOU CALCULATE CAPITAL GAINS TAX?

The current top rate long-term capital gains tax is 23.8%*

Under the new administration’s proposed tax plan, capital gains would instead be taxed at 39.6%**

*The current long-term capital gains rate includes a 20% tax on assets held for more than one year, along with a 3.8% surtax on net investment income, which was instituted as part of the Affordable Care Act to fund Medicare expansion.

**The proposed top long-term capital-gains rate applies to single taxpayers with more than $445,850 of income in 2021 and married couples filing a joint return with over $501,600 of income.

Disclaimer: ERE Healthcare Real Estate Advisors does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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