Election 2012: Pay Attention to the Capital Gains Tax

Anyone who already invests in commercial property or with plans to do so in the next few years should have more than a passing interest in the presidential candidates’ positions on tax issues, especially when it comes to the capital gains tax. As a refresher, capital gains are taxes paid on the profit from the sale of a property or other type of investment. It applies just as equally to stocks, bonds, rare stamps, or anything else purchased for the purpose of investment. Most types of commercial real estate fall into this category.

Up until 1921, capital gains weren’t such a big deal because they were taxed at the ordinary income tax rate, up to a maximum of 7 percent. Since then, various administrations have tinkered with the rate, sometimes raising it and sometimes lowering it. One thing is for certain. With a presidential election only three weeks away, property owners should be aware of the respective positions Barack Obama and Mitt Romney take on the issue. Trust us, it could make a large financial difference to anyone planning on selling a house in the near future.

Those adhering to Jason Hartman’s gospel of “refi ‘til you die” might not think the issue is such a big deal right now, but sooner or later, most of us will sell a property and we’d like to be able to keep as much of the profit as possible. Current capital gains, signed into law by former President George W. Bush, cap the rate at 15 percent. Here’s where the candidates stand on the issue.

What Obama Wants to Do

President Obama proposes an increase in the capital gains rate to 20 percent on high-earners. His definition of a high-earner is $200,000 for individuals and $250,000 for families. He also wants to impose a minimum 30 percent income tax rate on the so-called high-earners.

What Romney Wants to Do

Former Massachusetts governor Romney intends to take a different approach to the capital gains issue, completely eliminating investment income tax for anyone with an adjusted gross income of less than $200,000 per year, and maintaining the Bush capital gains rate of 15 percent for everyone else

The bottom line is that the issue of how much (if any) to charge for capital gains breaks across traditional party lines. Democrats want to see that the “wealthy” pay their “fair share,” while Republicans are convinced that taxing investment income puts a damper on the economy.

At CommercialInvestingCenter.com, we always suggest that you create a life of wealth and abundance irrespective of which party sits in the White House. Still, it doesn’t hurt to know what the future might hold in regard to your investment income. (Top image: Flickr | DonkeyHotey)

The Commercial Investing Center Team