Magazine article Journal of Property Management

Capital Gains Taxation Levels

Magazine article Journal of Property Management

Capital Gains Taxation Levels

Article excerpt

The appropriate level of taxation for capital gains has been a subject of tax policy debate throughout the history of the income tax. Capital gains have been taxed at rates well below the maximum tax rate for ordinary income for at least 50 years. During the past 25 years, that rate has ranged from a high of 49 percent to the current rate of 20 percent. Since 1997, depreciation allowances taken in prior years are "recaptured" and taxed at 25 percent when investment real estate is sold. Prior to 1997, depreciation recapture amounts were taxed at the same rate as capital gains. Capital losses are deducted in full against capital gains. In addition, individuals may deduct up to $3000 of capital losses against ordinary income in each year, with any remaining excess losses being carried forward to future tax years.

The Institute believes it is in our nation's best interest for Congress to encourage real estate investment in the United States by creating a tax system that recognizes inflation and a tax differential in the calculation of capital gains from real estate; while stimulating economic investment and consequently leveling the playing field for those who choose to invest in commercial real estate. …

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