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Bidden Capital Gains Tax on Estate will ELIMINATE YOUR LIFE SAVINGS - YouTube
Channel: Cortes Law Firm
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do you wonder why capital gains is
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important to your estate plan well by
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the end of today's video
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you'll have a better idea the
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dictionary's definition of a capital
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gains tax
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is a tax levied on profit from the sale
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of
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property or an investment sounds pretty
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simple right in our last three videos we
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discussed the 2021
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federal estate tax exemption president
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biden's proposal for estates
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and president biden's proposed changes
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to the stepped-up
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basis the reason we're spending so much
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time on this
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is because as the estate tax laws stand
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right now
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they only affect a really a very very
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small percentage
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of united states taxpayers as far as
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owing estate tax
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however if changes are made to the
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stepped-up basis
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then everyday americans might have to
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start paying a
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capital gains tax to learn more about
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what stepped-up basis means
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go back and watch this video up here
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after you finish this one of course
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today let's first talk about some
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important points
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capital gains tax is a federal tax on
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the profit
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from selling certain assets such as
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stock investments
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bonds jewelry coin collections and of
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course
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real estate collectively these are all
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sometimes referred to as capital assets
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the irs taxes capital gains differently
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depending on whether they are long-term
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or
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they're short-term and the capital gains
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tax is
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only paid on the profit or the realized
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gained
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after an asset is sold people sometimes
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think they owe a tax just because
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their house or stock has increased in
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value but the taxes only paid
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after an asset is actually sold
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that's an important point to remember
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it's also important to remember
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that capital gains can be offset by
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capital losses
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long-term capital gains for assets held
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longer than a year are taxed at
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either zero percent 15 percent or 20
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depending on your tax bracket short-term
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capital gains for assets held
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less than a year are taxed as ordinary
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income
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so all you day traders out there you
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need to be careful
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there are some special rates for certain
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types of assets
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such as collectibles which are actually
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taxed at 28
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regardless of your income so you need to
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check with your cpa
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or your tax professional when you sell
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any of those types of
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assets collectibles the biggest asset
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that most people have when it comes to
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their estate plan
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is their home right i think you'd agree
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with me on that
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so let's look specifically at what
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capital gains
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means to your home and really later on
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to your estate plan
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individuals must pay capital gains on
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any profit
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over 250 000 when they sell their
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personal home
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the home that they're actually living in
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married couples must pay capital gains
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on any
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profit over five hundred thousand
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dollars it's
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again important to remember these
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numbers are for owner
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occupied homes homes that you actually
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are living in
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investment real estate has its own set
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of rules and well
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that's for another video let's look at
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an example of a married couple
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who purchased their home in 1975 for
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25 000 i've seen it if they sell their
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home this year
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46 years later for 825 000
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then they've made a profit of 800 000
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right but remember a married couple pays
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a capital gains tax on the amount of
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profit
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over 500 000 800 dollars minus
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five hundred thousand equals and means
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they owe a capital gains tax on
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three hundred thousand dollars then
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depending on their tax bracket
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they will have to pay capital gains of
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either zero percent
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fifteen percent or twenty percent now
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this is a very
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simple example of capital gains tax
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regarding
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owner owned real estate what is
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important for estate planning
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is how this relates to the stepped up
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basis
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which is the law of the land right now
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like i said i did a video on stepped up
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basis but basically stepped up basis
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means that your heirs inherit your
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property
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at its value on the day of your death do
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you see how
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important this is to estate planning now
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that we've talked about capital gains
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let's go back to our earlier example
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this time
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let's say the husband dies first leaving
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his wife
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as a widow while she is still living the
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wife decides to sell or give the marital
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property
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the home to their son enrique on the day
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of this transfer
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the house is worth 825 thousand dollars
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just like before
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by doing so the wife has just triggered
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a capital gains tax
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on eight hundred thousand dollars
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however if instead enrique inherits the
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house
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when his mother dies then he inherits it
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at the stepped-up basis
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or the value on the date of her death
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and no capital gains taxes do enrique
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inherits the stepped-up basis of 825 000
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which was the value of the house on the
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date of his mother's death
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if enrique decides to sell the house
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let's say two years later for nine
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hundred and twenty-five thousand dollars
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then he would owe a capital gains tax on
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a hundred thousand dollars
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which is the difference between what he
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sold it at 925 000
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and the stepped-up basis he inherited
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the house for
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at 825 000. in doing probates for over
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20 years
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i have seen hundreds of estates just
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like the example above
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where a couple bought their marital home
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30 or 40 years ago
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and stayed in it until both of their
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deaths
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that is why the stepped up basis is so
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important
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i can tell you that if congress messes
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with a stepped-up basis
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and therefore the capital gains tax then
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a lot
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of united states taxpayers are going to
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be in for a very big
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and rude surprise we will have to see
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what if anything
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congress decides to do on this issue
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stay tuned
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i know i've thrown a lot at you today so
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that's why we've prepared our free guide
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on estate planning i'll put a link to it
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in the description below
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and in the comment section below that so
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that you can download it and get started
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in the right direction and to help you
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out even more watch this video up here
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and this video up here if you enjoyed
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this video
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then guys please smash that subscribe
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we post a new video have a great day and
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an awesome week and as always thanks for
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watching
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