Tax Increase Starting January 1, 2013


Expiring Tax Cuts
Here are some of the tax cuts that are scheduled to expire on December 31, 2012 if Congress does not take action before then:
  • The maximum federal income tax rate on most 2013 long-term gains from real property sales is scheduled rise from the current 15 to 20 percent.
  • The top rate on most long-term gains from selling properties acquired after December 31, 2000 and held for more than five years is scheduled to rise from the current 15 to 18 percent.
  • If you sell a rental property for a gain in 2013, a 25 percent maximum rate will apply to the gain amount attributable to the cumulative depreciation write-offs you've taken on the property. The same 25 percent rate also applies to depreciation-caused gains from 2012 sales. (Depreciation can cause a taxable gain even if you sell a rental property for somewhat less than the amount you invested -- because your basis in the property for tax gain/loss purposes is reduced by depreciation deductions.)
  • The maximum rate on 2013 short-term gains from real property sales will rise from 35 to 39.6 percent.
  • The maximum rate on net ordinary income from operating rental properties (when rental income exceeds your tax write-offs, including depreciation) will rise from 35 to 39.6 percent.

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