In case you don’t know, Capital Gains is the tax you pay when you sell a “capital asset” for a profit. Capital assets are the things you own such as real estate, furniture, fixtures, equipment, stocks, bonds, houses, cars…etc. Basically, it includes nearly everything you use in your childcare company or school as well as the things you own personally.
Many people mistakenly believe that when you sell an asset (a capital asset); you have to pay taxes on the sales price of that asset. That’s not true. You only pay taxes on the difference between the sales price and your “basis” in the asset assuming the sales price is higher. Concisely, “basis” is your investment or cost in the asset. While the basis is usually the amount you paid for the asset, it can also include other costs you have incurred for the asset. These costs can further reduce your tax bill. Again, you only pay taxes on your profit.
In 2013 (except for special cases), the maximum net capital gain tax rate rose from 15% to 20%. Most U.S. tax payers still pay a rate that is between zero and 15 percent, but the 20% rate is the most likely scenario when selling your early education company and your real estate for a profit. Keep in mind, that if you sell you your business for a profit and your real estate for a loss, the loss on your real estate can reduce (or eliminate) the tax bill for the profit you make on your business.
If you would like to know more about capital gains taxes or the use of capital losses for your benefit, then your CPA should be able to help you. If you or your CPA need help understanding or calculating the correct market value of your childcare company or school, then BFS has a completely (and I mean completely) free service that will help you both. Whenever you’re ready, you can contact us at bfsinc.net or call us toll-free at 800-467-1774.
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