Overview Of New York Taxes
Property taxes in New York vary greatly between New York City and the rest of the state. In New York City, property tax rates are actually quite low. The average effective property tax rate in the Big Apple is just 0.88%, while the statewide average rate is 1.69%.
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To calculate the exact amount of property tax you will owe requires your property’s assessed value and the property tax rates based on your property’s address. Please note that we can only estimate your property tax based on median property taxes in your area. There are typically multiple rates in a given area, because your state, county, local schools and emergency responders each receive funding partly through these taxes. In our calculator, we take your home value and multiply that by your county’s effective property tax rate. This is equal to the median property tax paid as a percentage of the median home value in your county.
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How To Avoid Capital Gains Tax In New York State
Another way to avoid Capital Gains is for one to buy a like-kind property, i.e. a home of equal or greater value than the property that was sold, usually within 180 days of selling the previous home. If one pursues this option, forms must be filed with the IRS to make them aware of the purchase.
How do you calculate capital gains tax?
- Capital gains tax normally is calculated by subtracting your cost from the sales proceeds. Your cost is called basis. A similar process applies to selling inherited stock. You subtract a basis thats different than cost.
M Alternative Minimum Tax
The present laws change the alternative minimum tax computation for nonresidents and part-year residents to parallel the changes in the regular tax computation.
The California alternative minimum tax of a nonresident or part-year resident is the amount by which the California tentative minimum tax exceeds the prorated regular tax. The computation is as follows:
CA alternative minimum tax = CA tentative minimum tax â Prorated regular tax
The California tentative minimum tax is the California alternative minimum taxable income multiplied by a rate. The rate is the amount of tax on total tentative minimum tax divided by the total alternative minimum taxable income. The computation is as follows:
CA tentative minimum tax = CA alternative minimum taxable income à Total tentative minimum tax ÷ Total alternative minimum taxable income
The California alternative minimum taxable income is the combined total of the following:
- The alternative minimum taxable income derived from California sources for any part of the taxable year the taxpayer was a nonresident.
- The alternative minimum taxable income from all sources for any part of the taxable year the taxpayer was a resident.
For the period of nonresidency, any carryovers, deferred income, suspended losses, or suspended deductions are included or allowable only to the extent they were derived from California sources.
- All prior years for any carryovers, deferred income, suspended losses, or suspended deductions.
Example 45
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State Capital Gains Tax Rates
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Real estate, retirement savings accounts, livestock, and timber are exempt for capital gain taxation in the state of Washington.
- Values shown do not include depreciation recapture taxes.
- AK, FL, NV, NH, SD, TN, TX, WA, and WY have no state capital gains tax.
- AL, AR, DE, HI, IN, IA, KY, MD, MO, MT, NJ, NM, NY, ND, OR, OH, PA, SC, and WI either allow taxpayer to deduct their federal taxes from state taxable income, have local income taxes, or have special tax treatment of capital gains income.
- This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
- Realized does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
Need to figure out your Capital Gains Tax liability on a sale of an asset? The Capital Gains Tax Calculator is designed to provide you an estimate on the cap gains tax owed after selling an asset or property.
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Other Variables To Consider When Minimizing Capital Tax Gains
When attempting to minimize your capital tax gains, there are two key factors you need to watch out for rule exceptions and the net investment income tax. Being aware of these variables will help you calculate the total capital gains taxes you owe for the year as accurately as possible.
While the standard capital gains tax rates apply to most assets, they do allow for a few noteworthy exceptions. Rule exceptions can be tricky because they allow long-term capital gains on certain types of assets, known as collectible assets, to be taxed at a higher rate. Collectible assets include items such as antiques, fine art, coins, precious metals and more. Those exceptions also apply to section 1250 real properties, such as commercial buildings and rental properties.
Along with rule exceptions, the net investment income tax can affect capital tax gains. Some investors end up owing an additional tax percentage on either their net investment income or the total by which their modified adjusted gross income exceeded the income threshold set for their filing status and tax bracket. Whichever amount is smaller will be subjected to this additional tax.
Reporting Capital Gains Tax On Your Return
When you file your annual tax return, you’ll have to complete some additional forms if you had a capital gain or loss during the tax year. Report your transactions giving rise to capital gain or loss on Form 8949. This includes capital gains and losses you earn through investments in mutual funds and other investment vehicles, as reported to you on 1099 or K-1 forms. Attach Form 8949 to your return.
Calculate your net capital gain or loss and report capital loss carryforwards from any prior year on Schedule D. You also must attach Schedule D to your Form 1040.
Use Form 4797 to report the sale of depreciable property used in your trade or business and depreciation recapture.
You also may be required to pay estimated taxes on capital gains. Generally, you must pay 90% of your current year’s taxes, or an amount equal to 100% of your taxes from the prior year , either through withholding or estimated tax payments. Paying estimated taxes on your capital gains throughout the year will help you satisfy that requirement and avoid penalties at tax time.
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Claiming Tax Exemptions If You Lived In The House At Least 2 Years Of The Last 5 Years Prior To Sale
If the property being sold is the primary residence and the taxpayer lived in the house for 2 out of the 5 years preceding the sale, the taxpayer can avail of a federal tax exemption of $250,000 from capital gains if single and $500,000 for married couples filing jointly. In the Hamptons house case above, if you are a married couple living in the property as your main home, the capital gain will be $800,000 instead of $1,300,000 because of the $500,000 tax exemption on married couples filing jointly on income arising from property lived in as their main home.
What Are Capital Gains Taxes
Before you can use a capital gains tax calculator to figure out how much you will owe during tax season when you choose to sell your asset, understand what capital gains taxes are. Essentially, capital gains tax refers to the tax you pay on profits you gain by selling an asset at a higher price than what you bought it for originally. Capital gains tax applies to all sorts of assets, including properties, antique art, stocks and bonds.
Capital gains tax applies only to realized profits, not to unrealized profits. Profits are classified as realized after they are sold, after which they can be taxed. Profits remain unrealized as long as they are unsold, which do not get taxed until you sell them. The exact rate you are charged on your profits and the amount of capital gains tax you owe will vary with:
- Your personal income
- Your length of ownership of the asset
- Your filing status
For instance, you should pay capital gains tax on a property only if you sell it. If the property appreciates and stays unsold, the profits qualify as unrealized gains and do not get taxed. Based on this definition of capital gains tax, you can also think of a capital gains tax calculator on the sale of property as a rental property depreciation recapture calculator.
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How To Minimize Capital Gains Tax
While the profit you earn whenever you sell an asset at a higher price is known as a capital gain, selling an asset at a lower price than you bought it for is known as a capital loss. You can minimize the total taxes you owe by offsetting your long-term capital gains with your long-term capital losses. The difference you get from subtracting your capital losses from your capital gains is known as your net capital gain.
Similarly, you can use any short-term capital losses to offset your short-term capital gains. However, you cannot use a long-term capital loss to offset a short-term capital gain or vice versa. If your capital loss ends up being more than your capital gain, you could claim a tax deduction to reduce your income.
Below are four of the top strategies for minimizing your capital gains taxes and reducing your tax burden.
How Income Taxes Are Calculated
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Capital Gains Tax Rates In Other States
As for the other states, capital gains tax rates are as follows:
Alabama
Taxes capital gains as income and the rate reaches 5%
Arizona
Taxes capital gains as income and the rate reaches 4.5%
Arkansas
Taxes capital gains as income and the rate reaches around 5.50%.
Colorado
Colorado taxes capital gains as income and the rate reaches 4.55%.
Connecticut
Connecticuts capital gains tax is 6.99%.
Delaware
Taxes capital gains as income and the rate reaches 6.60%.
Georgia
Taxes capital gains as income and the rate reaches 5.75%.
Idaho
Idaho axes capital gains as income. The rate reaches 6.93%.
Illinois
Taxes capital gains as income and the rate is a flat rate of 4.95%.
Indiana
Taxes capital gains as income and the rate is a flat rate of 3.23%.
Kansas
Kansas taxes capital gains as income. The rate reaches 5.70% at maximum.
Kentucky
Taxes capital gains as income. The rate is a flat rate of 5%.
Louisiana
Taxes capital gains as income. The rate reaches 4.25%.
Taxes capital gains as income and the rate reaches 5.75%.
Massachusetts
Taxes capital gains as income. Long-term capital gains are usually taxed at a flat rate of about 5% but there are some types of capital gains that the state taxes at 12%.
Michigan
Taxed as income and at a flat rate of 4.25%.
Mississippi
Taxed as income and reaches 5%.
Missouri
Taxed as income and the rate reaches 5.4%.
Montana
Taxed as income and the highest income tax rate is 6.90%, but with a 2% capital gains credit, this rate is technically 4.9%.
Nebraska
Capital Gains Tax Strategies
The capital gains tax effectively reduces the overall return generated by the investment. But there is a legitimate way for some investors to reduce or even eliminate their net capital gains taxes for the year.
The simplest of strategies is to simply hold assets for more than a year before selling them. That’s wise because the tax you will pay on long-term capital gains is generally lower than it would be for short-term gains.
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How Can You Avoid Capital Gains Taxes
If you want to invest money and make a profit, you will owe capital gains taxes on that profit. There are, however, a number of perfectly legal ways to minimize your capital gains taxes:
- Hang onto your investment for more than one year. Otherwise, the profit is treated as regular income and you’ll probably pay more.
- Don’t forget that your investment losses can be deducted from your investment profits, at a rate of up to $3,000 a year. Some investors use that fact to good effect. For example, they’ll sell a loser at the end of the year in order to have losses to offset their gains for the year.
- If your losses are greater than $3,000, you can carry the losses forward and deduct them from your capital gains in future years.
- Keep track of any qualifying expenses that you incur in making or maintaining your investment. They will increase the cost basis of the investment and thus reduce its taxable profit.
Understanding The Capital Gains Tax
When stock shares or any other taxable investment assets are sold, the capital gains, or profits, are referred to as having been “realized.” The tax doesn’t apply to unsold investments or “unrealized capital gains.” Stock shares will not incur taxes until they are sold, no matter how long the shares are held or how much they increase in value.
Under current U.S. federal tax policy, the capital gains tax rate applies only to profits from the sale of assets held for more than a year, referred to as “long-term capital gains.” The current rates are 0%, 15%, or 20%, depending on the taxpayer’s tax bracket for that year.
Most taxpayers pay a higher rate on their income than on any long-term capital gains they may have realized. That gives them a financial incentive to hold investments for at least a year, after which the tax on the profit will be lower.
Day traders and others taking advantage of the ease and speed of trading online need to be aware that any profits they make from buying and selling assets held less than a year are not just taxedthey are taxed at a higher rate than assets that are held long-term.
Taxable capital gains for the year can be reduced by the total capital losses incurred in that year. In other words, your tax is due on the net capital gain. There is a $3,000 maximum per year on reported net losses, but leftover losses can be carried forward to the following tax years.
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Net Income Investment Tax
The Net Investment Income Tax is an additional tax of 3.8% payable on capital gains for high income earners. NIIT income thresholds are $200k for single filers, $125k for married individuals who file separately, and $250k for married filing jointly. The tax went into effect on January 1st, 2013 as part of the Affordable Care Act signed into law by President Barack Obama.
New York Assessed Values
The property tax system in New York starts with an assessment of your property to determine the market value. That is done by a local official, your city or town assessor. Assessments should happen regularly, but many cities and towns have not made reassessments in many years.
Since many assessments are not current, each tax area is assigned a Residential Assessment Ratio that represents the ratio between assessed values and current market values. So, for example, if the market value of your home is $100,000, and your citys RAR is 54%, your assessed value should be $54,000.
Your RAR doesnt affect the taxes you actually pay, but it is important to know to ensure that your home is not over-assessed. For example, if your home is worth $150,000, your local RAR is 50%, and your assessed value is $125,000, your home is over-assessed. Your assessed value implies a market value of $250,000, much higher than the true market value of $150,000. In that case, you may want to contest your assessment. Otherwise, you will wind up paying more than your fair share of taxes.
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