Reply to biden pushing for new capital gains tax

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]He’s just considering proposing that for people making over a $1 million the capital gains tax rate is the same as a the ordinary income rate.

It’s a way to avoid all the ridiculous games like the carried interest loophole that lets hedge fund managers making $50 million pay tax at a lower rate than w-2 employees making $200k. [/quote]

But it should be higher, make it 1.5 mil or 1.75. [b]These low numbers hurt the average millionaire man the most. [/b]A property owner that has two or three rentals will get totally screwed. This really hits hard for families trying to build generational wealth. [/quote]

FTFY

How utterly cruel, they want to hurt the average man with 3-4 properties earning over $1M/year! Poor guy, how are his great great great grandchildren going to survive?
[/quote]

No not per year, it’s likely just once, when they liquidated the asset. It’s not salary. So everything they worked for, and paid off is basically useless.  If you have a mortgage that you’ve paid off then go to sell and pay almost 50% in tax then it doesn’t make sense numbers wise. The interest paid on the mortgage and the tax on gains plus the income from the rents make this a losing endeavor.  Why not just pass a law saying CEO’s have to be compensated in salary and cash bonuses and limit the stock they can get? Why go for a cash grab disguised as sticking it to the man. Be smarter.[/quote]

This is me. Bought a house in 04 for $575k which was an obscene amount of money to me.  The house was in a bad area and was more than I felt comfortable paying but, I took a chance. Lived in the house for 7 years, during that time I got married so household income doubled and savings increased. In 2011 with two kids entering school needed a house in better school district. Mortgage rates were low so rolled outstanding balance into new mortgage and set up an LLC and rented the house out for a decent amount and hoped to hold it as our retirement investment (sell and use proceeds for retirement) Today, the house is worth just over  1 million dollars. While we are not poor we most certainly are not thought of as the target audience for this new tax.  If we sell the house for $1 million then $440,000.  We would walk away with $560,000, this is less than we bought the house for 20 years ago.  This is complete craziness. [/quote]

You would not be affected.  Your capital gains on the house are not the $1M you are selling for.  Your cost basis is $575K.  Selling for $1M, your capitol gains are $425K.  The proposed change in capitol gains will not affect you at all.  You would be taxed at the same rate before and after the proposed change.  The top bracket that is being affected current starts around $518K for single filers and around $582K for MFJ filers.

You would be taxed at 0% for the first $92K and then at 15% for the rest (essentially $50K).  And as a rental, you can also deduct costs that you made the improve the property during the period that you rented as long as they were not cosmetic (e.g. paint and carpeting do not count).  So, you will be clearing much more than you think.

The new proposal makes zero change to your situation.[/quote]

This is annoying to me because DH and I fall into the impacted MCJ category and we are W2 earners (with some investments), little kids, almost done paying off student loans for bschool, living in a very HCOL area so we can use those bschool degrees, and then SALT is repealed and now this. And we have friends who make $250K, live in $2.5M mortgage free homes from mom and dad, and use trust funds to pay for private school and nannies. I will absolutely vote Biden for prez because I care about democracy and the environment but I find this type of proposal frustrating. Making $600K or $700K is a lot but when you are paying off loans, paying for kids, living in a HCOL area because that is where you need to live to get jobs that allow you to make that money a proposal like this and the repeal of SALT just hit really hard. I wish there were more blue dog democrats. [/quote]

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