Selling Your Investment Property in 2010 Could Save You Thousand in Taxes
If you are an investor looking to sell one or more of your real estate holdings, you might want to consider completing the sales transaction in the next year. At the end of 2010, tax cuts put in place by President Bush will be reset to standard income tax rates and you will lose your opportunity to take advantage of the lower rates.
As an investor looking to sell a house fast, you are most likely already familiar with capital gains taxes, but most home buyers are not. Therefore, the decision to buy houses in PA is not made because of the capital gains tax reductions that you, the seller, will get if the property sells before the end of 2010.
The current capital gains tax rate is actually a two-fold calculation. If you are selling a property for which you have claimed depreciation, then you must be aware of the total amount of the depreciation claimed. Many investment home buyers bought properties as part of a we buy houses type program and want to sell the house now. In that case, the capital gains tax rate will be 10%.
On the other hand, if you have claimed depreciation be aware that when you find a home buyer, you will be taxed at 25% for the amount that you claimed in depreciation when you sell your house now. The advantage of selling is still in your favor however, since the remaining sales revenue will be taxed at the lower 10% rate.
This advantage means that you will keep more of the profits when you sell your house now, instead of waiting until after the end of 2011. Whether you pay just the lower amount of capital gains tax, or you split the percentage rate, you will still likely earn more from the sale in the next year than at any point in the future.
The market is definitely leaning towards sellers right now, because there are many individual home buyers in Philadelphia and investors looking to buy homes in PA. They are looking for deals, and although the idea of selling at a lower price does not always seem appealing in comparison to waiting a year or so to sell, today it is not a bad idea to sell a house fast for a lower price. This is because even at a lower selling price, your property is going to bring you larges profits than if you wait a year and sell for a significantly higher price.
Keep this information in mind as you make decisions regarding your real estate investments, particularly if you are already planning to sell in the near future. There has not been a better market for home buyers in years, and fortunately for the investor, prices are higher than they were over the last few years and there is a significant profit to be made by selling in the next year.