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Numerous capital gains tax changes have been made in the U.S. over the last three decades. Capital gains tax is an income tax that individuals and corporations pay on their income. The tax rate on this type of gain has historically been a preferential rate, as compared to earned income. The tax rate is contingent upon the tax bracket of the involved party. Capital tax gains are divided into the higher taxed short-term capital gains, and the lower taxed long-term capital gain. The following provides a snapshot of changes made in the last 10 years:
1997 - 2002
In 1997, capital gains tax rate changes was cut down from 28% to 20%. Due to the lower tax rate, the capital gains revenue increased by almost 92% over four years. It went from $66 billion to $127 billion. In 2001 and 2002 capital gains revenue decreased because of the crash in the stock market prices. The decline was almost 62% from 2000 to 2002.
2003
In 2003, capital gains taxes were reduced from 20% to 15% through the Jobs and Growth Tax Relief Reconciliation Act. This reduction is scheduled to expire at the end of 2010 and the rate will be increased back to 20%. Many democrats are pushing for a higher capital gains tax rate, some are suggesting as much as 35%.
2008 - 2009
Both in FY 2008 and FY 2009 budget resolution conferences, there was a debate for the capital gains tax rate to be returned to 20% after 2010. Many believe that increasing capital gains tax they will harm the economy because many employers will move their businesses elsewhere.
The Housing and Economic Recovery Act and Housing Assistance Tax Act of 2008 have made some recent changes to capital gains taxes. The changes were implement to specifically cater to the subprime mortgage crisis and it's affect of house sales. A refundable tax credit of 10% has been instituted as well, with a maximum credit of $7,500. The credit is available for a person buying the house as a principal residence and making the purchase in the window between April 9, 2008 and July 1, 2009. The credit is phased out for taxpayers that earn over $75,000 per annum on an individual basis, or $150,000 in the case of couples. The credit is to be repaid over a period of 15 years in equal installments.
Another major change for 2008 has been the exclusion of capital gains taxes with respect to primary residences. Before 2008, a homeowner could benefit from the exclusion of capital gains tax if they lived at the principal residence for 2 consecutive years out of the last 5 years. However, as of January 1, 2009, this exclusion will apply only for those in their principal residence for a 5 year period. For example, if the property was rented out for portions of the 5 year period, then this would be a non-qualifying and may be subjected to capital gains tax on a pro-rated basis with respect to the property’s total period of ownership.
You should discuss capital gains tax related issues with your tax advisor to make sure you benefit from all capital gains deductions and exclusions that you may be eligible for. There are many complex tax laws that can legally defer capital gains tax that a homeowner may be eligible for and a tax advisor can help you benefit from the benefits.
1997 - 2002
In 1997, capital gains tax rate changes was cut down from 28% to 20%. Due to the lower tax rate, the capital gains revenue increased by almost 92% over four years. It went from $66 billion to $127 billion. In 2001 and 2002 capital gains revenue decreased because of the crash in the stock market prices. The decline was almost 62% from 2000 to 2002.
2003
In 2003, capital gains taxes were reduced from 20% to 15% through the Jobs and Growth Tax Relief Reconciliation Act. This reduction is scheduled to expire at the end of 2010 and the rate will be increased back to 20%. Many democrats are pushing for a higher capital gains tax rate, some are suggesting as much as 35%.
2008 - 2009
Both in FY 2008 and FY 2009 budget resolution conferences, there was a debate for the capital gains tax rate to be returned to 20% after 2010. Many believe that increasing capital gains tax they will harm the economy because many employers will move their businesses elsewhere.
The Housing and Economic Recovery Act and Housing Assistance Tax Act of 2008 have made some recent changes to capital gains taxes. The changes were implement to specifically cater to the subprime mortgage crisis and it's affect of house sales. A refundable tax credit of 10% has been instituted as well, with a maximum credit of $7,500. The credit is available for a person buying the house as a principal residence and making the purchase in the window between April 9, 2008 and July 1, 2009. The credit is phased out for taxpayers that earn over $75,000 per annum on an individual basis, or $150,000 in the case of couples. The credit is to be repaid over a period of 15 years in equal installments.
Another major change for 2008 has been the exclusion of capital gains taxes with respect to primary residences. Before 2008, a homeowner could benefit from the exclusion of capital gains tax if they lived at the principal residence for 2 consecutive years out of the last 5 years. However, as of January 1, 2009, this exclusion will apply only for those in their principal residence for a 5 year period. For example, if the property was rented out for portions of the 5 year period, then this would be a non-qualifying and may be subjected to capital gains tax on a pro-rated basis with respect to the property’s total period of ownership.
You should discuss capital gains tax related issues with your tax advisor to make sure you benefit from all capital gains deductions and exclusions that you may be eligible for. There are many complex tax laws that can legally defer capital gains tax that a homeowner may be eligible for and a tax advisor can help you benefit from the benefits.
