Message Font: Serif | Sans-Serif
No. of Recommendations: 2
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.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.