Capital Gains Rates Make a Taxable Sale a Reasonable Planning Option

When a home is sold, to the extent that the gain exceeds the amount that can be excluded under the home sale exclusion rule, income tax will be due (unless offset by other planning techniques, realization of capital losses, etc.). This tax, however, will generally be at favorable capital gains tax rates. The maximum federal capital gains income tax rate is currently 15 percent or lower . However, consider:

• The likelihood of future legislation changing this, especially for higher income clients.
• Various tax law exceptions to this rate.
• Your client’s state tax bill.

Pointer: Monitor the effective dates of any pending or future tax legislation as the timing of a closing may be able to be used to control the tax impact to your clients.