More on the Proposed Capital Gains Tax Increase

Check out the next podcast in our series on the proposed legislative changes!

Today Marcia and I explain what the capital gains tax increase will mean and its importance regarding your investment decisions.

René Nelson, Eugene commercial real estate broker
Marcia Edwards, Eugene residential real estate broker

Legislative Changes in Real Estate – Part 2

Marcia Edwards: So last program, we were talking about some changes legislatively in capital gains tax. Let’s get a quick summary of what’s going on that you see coming down the pike.

René Nelson: Yeah, President Biden is proposing to raise capital gains from 20% to 40%, so what that means, in the past, you could sell a piece of real estate that was an investment property, and you could roll that profit forward into the new property and not pay any tax on it, or you could decide to sell and pay capital gains and pay 20%, but that’s going to increase, it’s going to double, it’s going to go to 40%.

Marcia Edwards: Or you never sell and when you die, that is adjusted, so the basis goes up to the price, right?

René Nelson: Yeah. So, it gets passed to your heirs. And we need to talk about that, but where I see this impacting most of our listeners, we have a lot of clients that own real estate, passive investment real estate, and a lot of people have been bumping along and just trying to survive through the COVID and the rent hardships and the different things, but a lot of people are starting to edge towards retirement and thinking, “I’m probably going to need to go into something with less maintenance, something easier to get cash flow off of, where I don’t have to do as much work.” Well, you need to come up with a plan because here’s the dilemma. If you wait a year or two and you decide to sell, your capital gains are going to be potentially double, 40%.

Marcia Edwards: 40%, that’s fascinating to me. So that’s a big grab. So this makes things that have been important but not urgent, now also urgent in your portfolio and your planning. Today is a great day to take a look at this before you’ve got the time bomb ticking.

René Nelson: Yeah, and President Biden said that he was going after the super rich and the wealthy on this, but here’s the deal. Those people have a whole team of investors, a whole team of advisors that are taking care of them. They’ve got the tax strategists and the CPAs. This is really going to impact the middle Americans. It’s going to impact us, those of us that own apartment complexes and investment property.

Marcia Edwards: Exactly, and the $500,000 price point, exceeding 500,000 doesn’t take a lot now.

René Nelson: No.

Marcia Edwards: Median sales price is 403, so we’re in a market where this is going to bite those of you that was not intended to be the target. Let’s talk about how to plan for that next program.

René is available to answer your real estate investment questions. Schedule a 15-minute discovery call to better understand your investments and the market today.