Magazine article Journal of Property Management

Whither Capital Gains?

Magazine article Journal of Property Management

Whither Capital Gains?

Article excerpt

The Bush administration proposes a new method of computing recapture

Congressional debates about capital gains taxation are always conducted with a feverish religious undertone: You are either a believer in low capital gains rates or you're not. Currently, long-term capital gains are taxed at 15 percent, with depreciation recapture continuing to be taxed at 25 percent.

When Congress reduced the capital gains rate from 20 to 15 percent, no change was made to the 25 percent depreciation recapture amount, despite protests from major real estate organizations. Now, President Bush proposes a new method of computing depreciation recapture taxes: Rather than apply the fixed 25 percent rate to all recapture amounts, the proposal would tax half of the recapture amount as ordinary income and half as capital gains. Currently, those in the 35 percent income tax bracket would continue to have an effective rate of 25 percent on depreciation recapture amounts. Those in lower brackets would have slightly lower rates on recapture amounts. …

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