If you own real estate or are considering investing in real estate, no doubt you are interested in navigating the intricacies of the tax system and know how essential it is to stay informed about changes or updates that may impact your financial planning. One such area of interest is capital gains taxes, which play a significant role in the sale of real estate and in capturing investment income.
I myself am not an accountant or financial planner, and so I do advise you to seek the advice of a financial professional. However, according to CNBC Personal Finance in an article titled "Here’s how much you can earn and still pay 0% capital gains taxes in 2023" by Kate Dore and published in October of 2022, the IRS capital gains tax thresholds have been adjusted upwards, favorably affecting both single filers and married couples filing jointly.
For many of my real estate clients, this is important and good news as capital gains play a significant role in decision-making regarding the sale of real estate assets. Seniors particularly may have higher levels of capital gains built up in their properties, and at the same time, may have levels of income providing for qualification in the lowest tax brackets.
In this blog post, I will delve into the details that have been shared with me regarding the new capital gains tax rates for 2023, providing you with a brief overview of the knowledge you need to understand in order to navigate the intersection between your real estate sales and your potential tax obligations. This information is not designed to be tax advice or financial guidance, but rather to provide you with a bit of detail that you may then take to your financial planner and use in your real estate decision-making.
Capital gains tax rates for single filers in 2023 are as follows:
0%: This rate applies to individuals with a taxable income ranging from $0 to $44,625. If your income falls within this bracket, you may not owe any taxes on your long-term capital gains.
15%: If your taxable income ranges from $44,626 to $492,300, you may be subject to a 15% tax rate on your long-term capital gains.
20%: Single filers with a taxable income exceeding $492,301 may face a 20% tax rate on their long-term capital gains.
Capital Gains Tax Rates for Married Filing Jointly: For married couples filing jointly, the capital gains tax rates in 2023 are as follows:
0%: This rate applies to couples with a combined taxable income ranging from $0 to $89,250. If your income falls within this bracket, you may not owe any taxes on your long-term capital gains.
15%: If your combined taxable income ranges from $89,251 to $553,850, you may be subject to a 15% tax rate on your long-term capital gains.
20%: Couples filing jointly with a combined taxable income exceeding $553,851 may face a 20% tax rate on their long-term capital gains.
Key Considerations:
Different tax rates for short-term gains: It's important to note that the capital gains tax rates mentioned above apply specifically to long-term capital gains, which are assets held for more than one year. Short-term capital gains, on the other hand, are taxed as ordinary income, subject to the individual's marginal tax rate.
Tax planning opportunities: Understanding the capital gains tax rates can provide opportunities for strategic tax planning. For example, if you expect your income to increase in the future, it might be beneficial to realize some gains in the current year when you fall within a lower tax bracket.
Consult a tax professional: Navigating the complexities of capital gains taxes can be challenging, especially if you have substantial investments or unique circumstances. Consider consulting a tax professional who can provide personalized advice tailored to your specific situation.
Conclusion: Being aware of the capital gains tax rates for 2023 is crucial for anyone involved in real estate and investment activities. By understanding the tax brackets and rates, individuals can make informed decisions about their investment strategies and tax planning.
Remember to consult a tax professional to ensure that you accurately apply the capital gains tax rates to your specific circumstances.
Stay informed and take advantage of the
opportunities available to optimize your tax obligations while achieving your financial goals. For more information and the IRS publication relating to capital gains tax rates:
Comments