I am considering purchasing a single family home to rent out. If I was to make renovations and then decide to sell (anticipating a profit), what is the current short-term capital gains rate vs. short-term rates? Are there local capital gains rates in Maine or Massachusetts? Where could I look to find this info myself? Thank you.

If I was to make renovations and then decide to sell (anticipating a profit), what is the current short-term capital gains rate vs. short-term rates?

Short term capital gains rates are equal to your marginal tax rate. I.e. its taxed as regular income, and can indeed push you into a higher tax bracket. Its income like any other.


Are there local capital gains rates in Maine or Massachusetts?

Mass has a 12% tax on short term capital gains (and some collectibles), but I don't know if it applies to real estate or just securities.


Where could I look to find this info myself?

IRS publication 550: Capital Gains and losses:
http://www.irs.gov/publications/p550/

Mass Department of Revenue:
http://www.massdor.com/

Maine Revenue Services:
http://www.maine.gov/revenue/

Sorry, that should be short-term vs. long-term capital gains rates. Thanks.

Long term capital gains are taxed at 15% if you're in a tax bracket higher than 15%. And they're taxed at 5% if you're in the 10 or 15% tax bracket. All this is in that IRS publication.

Sorry, that should be short-term vs. long-term capital gains rates. Thanks.

The federal rates have already been posted. Most states tax all income at the same rate. I'm not sure about the specifics of MA or ME.

Ira

Mass has a 12% tax on short term capital gains (and some collectibles), but I don't know if it applies to real estate or just securities.

I'm pretty sure the 12% tax applies to all short-term gains. Line 10 of Mass. schedule D ("short-term capital gains") asks you to enter items from lines 1, 2, 4 & 5 of column F, U.S. 1040 schedule D. Instructions for 1040/D say you should "Enter all sales and exchanges of capital assets, in cluding stocks, bonds, etc., and real estate (if not reported on Form 4684, 4797, 6252, 6781, or 8824). But do not report the sale or exchange of your main home unless required."

So, unless the house is your main home/primary residence, and it doesn't get reported on one of the other forms, it seems to me that its sale would fall under the usual capital gains tax treatment.

FYI, The 2005 Mass. long-term rate was the same as income tax, 5.3%.

Puss