Podcast: Everything You Need To Know about Real Estate Tax in 2021

Key Points:

• Biden proposes an increase in cap gain taxes for certain taxpayers.
• Increases could return cap gain tax rates to those not seen since before the Reagan era.
• Cap gains tax rate could increase to 43.4% for those with incomes over $1 million.

Tax law changes from year to year, mainly when significant political changes occur. With a new administration in the Oval Office in 2021, this year is no different.

Host Joseph Cahoon talked with Rob Nowak, a tax partner with Weaver, the largest CPA firm in the southwest, for this Folsom Forum Webinar by the Folsom Institute for Real Estate at Southern Methodist University. The duo talked about changes to tax law and what that means in real estate and in a broad sense.

Capital gains might be the big topic of taxes at the moment, with the Biden administration proposing to raise the rate to 43.4% for those with incomes over $1 million.

During election season, both candidates proposed tax changes. The Biden/Harris ticket proposed equalizing rate structures between different levels of income earners, Nowak said, with one of the rates being discussed the aforementioned capital gains rate. No legislation is passed, but there is a potential road map laid out for tax increases.

“Cap gains rates might increase from, let’s say, 20 to 28%, or from 20% to the highest ordinary rate, but only for those taxpayers who meet certain income thresholds,” Nowak said. “That income threshold might be a million of income, it might be $400,000 of income, but we’re not talking about a wholesale adjustment of the cap gain rate structure.”

If the capital gains rate went from 20 to 28%, it would be a reversion back to the Reagan-era capital gains tax rates.

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