New changes in tax laws are going to make investing much less profitable than before. This is sure to affect buyers and sellers of Carmel CA homes.
If you are single and earn over $200,000 or a couple who earns more than $250,000, then the new Medicare tax on investment income will enlarge your capital gains tax, which is quite a substantial increase over the current levels.
The tax cuts by the Bush government will stop by the end of 2010. For anyone selling a luxury Carmel CA homes where they’ll profit more than $500,000, around 2010 or 2011 is the best time to sell. The main reason is that the capital gains tax will rise from 15% to 20% by 2011. There will also be additional Medicare tax that will be enforced in 2013.
There is another option that savvy investors and homeowners of Carmel CA homes can take, especially those who own multiple luxury residences. Currently, the law allows homeowners to keep $500,000 in profits for couples and $250,000 for singles for the sale of their primary residences. A good strategy is to change home every 2 years, just enough to be eligible for the $500,000 tax exception.
Another route you can take is to rent out the said properties and then execute a series of 1031 exchanges that allows you to defer your taxes at a later date. If you think that congress will repeal the current law, then a delay tactic is a good choice. But, if you foresee that the tax increases will stay, then selling your excess inventory now is a wise idea.