While talking with my friend, he mentioned that the Capital Gains Tax for a vintage guitar (read: Luxury Item) was around 28%. I assume the 28% is levied on the increased value of the guitar not the guitar's selling price. Is this a correct assumption? Are there any kinds of exemptions that he may be able to apply (first time home buyer, et cetera)?There is no such thing as a Luxury Item capital gains rate. There is a collectibles capital gains rate which tops out at 28%, that is, such capital gains are taxed at 5, 15, 25, or 28%. Guitars don't seem to fall within the IRS definition of collectibles (as presented in IRS Pub. 550, Investment Income and Expenses), but I would want to research further before concluding that regular long term capital gains rates apply.And, yes, the tax is on the gain, not the sales proceeds. There are no exemptions to avoid tha tax.Ira
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