Capital Gains Rate Cuts Property Held Over 5 Years |
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The post-2000 rate cuts for capital gains will produce automatic tax savings for some taxpayers, but will require others to pay taxes up-front for the privilege of a slightly lower capital gain rate down the road.
Deducting Investment Interest |
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Generally, the only interest still deductible on the Schedule A is home mortgage interest, with one exception, investment interest. Investment interest can be interest you pay on your brokerage margin account, interest on investment property such as land, etc. However, this interest deduction is limited to "net investment income." In layman's terms, you can only deduct the interest expense to the extent you have investment income.
The costs associated to your investments are deductible as a miscellaneous itemized deduction, subject to the 2% of gross income (AGI) limitation. Although they may seem trivial, it's still worthwhile to keep track of them as they can add up quickly. Combined with other allowable deductions, they can reduce your taxable income. Keep in mind, however, that investment expenses associated with tax-exempt income are not deductible. If the expenses are associated with both, you will need to prorate the expenses.
Fine-Tuning Capital Gains and Losses |
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The year’s end has historically been a good time to plan tax savings by carefully structuring capital gains and losses. Let’s consider some possibilities.
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