Individuals in the 10% and 15% bracket in 2006 earned a taxable income of up to $29,700 for singles, $59,400 for joint filers, $39,800 for heads of households, and $29,700 for married individuals who file separately.
Here's how this rule works. Let’s say you're filing jointly and had $55,000 of "regular" taxable income in 2006 and a net long-term gain of $10,000 from stock sales. The first $4,400 of gain from the stock sale will be taxed at 5%. The remaining $5,600 ($10,000-$5,600) will get taxed at the standard 15% rate. If the net long-term gain is $4,400 or less, the tax rate is 5% on the entire gain.
The 15% Rate
The 25% Rate
Investment real-estate gains are taxed in two ways. If you claim depreciation deductions, at least some of those gains are taxed at a maximum rate of 25%.
For example, say you own a rental property and have deducted $32,000 of depreciation over the years. That depreciation reduces your basis in the property and results in a bigger taxable gain (or smaller loss) when you sell. Say you sold in 2006 for a $100,000 gain. The first $32,000 (called an unrecaptured Section 1250 gain) is taxed at a maximum rate of 25%. The remaining $68,000 of gain is taxed at the standard capital gains rate of 15%.
If you own shares in a REIT, when the REIT sells a piece of depreciable property and distributes the profit to its shareholders, you are taxed at the 25% maximum rate.
Collectibles and Small-Business Stock
Net long-term gains from collectibles (stamps, coins, baseball cards and the like) are subject to a 28% maximum rate. This rate also applies to the taxable part of a gain from selling certain small-business stock that qualifies for a special 50% gain exclusion rule. Basically, these are shares in relatively small corporations that were originally issued to you and that you've owned more than five years.
For more information on capital gains, try www.smartmoney.com.
For more on Southern California commercial properties there is a great information blog at www.socalindustrialrealestateblog.com.