|
 he information that follows is
designed to help you think about tax and financial planning for this year, next year, and
the longer term. Among these items, you will find tax-saving moves for you and your family
for now and for the future.
|
We've posted our updated tax planning guide. Click here for planning tips and strategies for 1999 and beyond.
|
In this section, we explain:
1997 RULES TO KNOW ABOUT
- The Rate of Tax on Individuals' Long-Term Capital Gains Is Down. The maximum rate
of tax on the net long-term capital gains of individuals has generally fallen from 28% to
20%. A 10% capital gains rate applies to gains for taxpayers in the 15% tax bracket. These
new rates apply for both the regular tax and the alternative minimum tax (AMT).
Effective for taxable years beginning after December 31, 2000, gains on property held by
individual taxpayers for more than five years are subject to rates that are reduced even
further. The 20% and 10% rates are reduced to 18% and 8%, respectively. To avoid having to
sell and repurchase assets to start a new holding period, affected taxpayers may elect to
treat marketable securities and certain other assets as if they had been sold and
repurchased for the purpose of recognizing gains but not losses on January 1, 2001.
The table below summarizes the long-term capital gains tax rates applicable to individuals
(based on tax bracket and date of sale of asset).
TABLE 1-1
Long-Term Capital Gains Tax Rates |
Description
of Property |
Sale of Property Effective Dates |
Holding Period |
Federal Tax Bracket(s) |
Capital Gain Tax Rate(%) |
| Capital Asset |
1/1/97 through 5/6/97 |
Over 12 months |
Above 15% |
28% |
| Capital Asset |
After 5/6/97 but before 7/29/97 |
Over 12 months |
15% |
10% |
| Capital Asset |
After 5/6/97 but before 7/29/97 |
Over 12 months |
Above 15% |
20% |
| Capital Asset |
After 7/28/97 |
Over 12 through 18 months |
Above 15% |
28% |
| Capital Asset |
After 7/28/97 |
Over 18 months |
15% |
10% |
| Capital Asset |
After 7/28/97 |
Over 18 months |
Above 15% |
20% |
| Collectibles |
1/1/97 |
Over 12 months |
Above 15% |
28% |
| Capital Asset |
After 12/31/00 |
Over 60 months |
15% |
8% |
| Capital Asset |
After 12/31/05 |
Over 60 months |
Above 15% |
18% |
| Section 1250 Property a |
After 5/6/97 but before 7/29/97 |
Over 12 months |
Above 15% |
25% |
| Section 1250 Property a |
After 7/28/97 |
Over 12 through 18 months |
Above 15% |
28% |
| Section 1250 Property a |
After 7/28/97 |
Over 18 months |
Above 15% |
25% |
| a. The rates apply to the sale of section 1250
property (depreciable real property) and to the taxation of the net section 1231 gain
portion to the extent it is comprised of "unrecaptured section 1250 gain." |
- New Tax Breaks for Sales of Principal Residences. Taxpayers who sell their
principal residence after May 6, 1997, may exclude up to $250,000 of gain that they
realize on the sale or exchange. Married taxpayers filing a joint return can exclude up to
$500,000. Taxpayers may use this exclusion once every two years. Only taxpayers who have
owned and occupied a home as a principal residence for at least two of the five years
prior to any sale or exchange may take full advantage of the exclusion.
Taxpayers may elect to apply prior law to sales or exchanges occurring:
- Before August 5.
- After August 5, 1997, under a binding contract in effect on August 5, 1997; or
- When the replacement residence was acquired on or before August 5, 1997 (or under a
binding contract in effect on that date) and the rollover provision would apply.
|
Tax
Guide
