Suppose in fiscal year 2024, I bought $10,000 worth of shares in company X and by the end of the fiscal year, it is worth $20,000 ( an unrealized gain of $10,000). I DID NOT sell the shares that I own because I anticipate the share value to continue to go higher.
Question: Under this SCOTUS decision, will I be required to pay $10,000 UNREALIZED capital gains?
How does this decision affect the value of my home?
If I bought my home in this fiscal year for $400,000 and within a year, it is now valued at $430,000, will I be required to pay taxes on the unrealized gain of $30,000 even if I did not sell my house and continue to live there?
Congress should have passed a law clarifying that the mandate was NOT a tax.
It’s even worse.
If you lose money, you lose almost all of it. For those with tax experience, you can take a write off on losses to offset gains on others.
But, that $10,000 investment (after you paid taxes on it), say it grows to $20K, as you stated, 100% growth (with accompanying risk). On top of paying state and local income taxes (0 to 10.75), you have Capital Gains Tax (10-37%) plus Income Tax (10-39.6). So taking averages of these taxes, 5.25% (State Income) + 23.5% (Cap Gains) + 24.8 (Fed Income) we have a tax bill of 53.55%
Lucky you, you get to risk $10,000 of your hard earned earnings (after tax) and if you see 100% growth, you will be taxed on 53.55% of that growth; or get to keep $4,645 of your investment.
Makes you want run out as fast as you can and invest your earnings, doesn’t it? /s
Never underestimate the ability of DEMS to screw up any system.
No. The repatriation tax was only for assets being returned from overseas. Doesn’t apply to appreciation in domestic assets.
Companies were thrilled with Trump’s proposed legislation.
“Supreme Court clears the way for a a wealth tax”
No they didn’t.
“If I bought my home in this fiscal year for $400,000 and within a year, it is now valued at $430,000, will I be required to pay taxes on the unrealized gain of $30,000 even if I did not sell my house and continue to live there?”
No you will not. The law referred to has been in effect since 2017. Have you heard of one single person that has been sent a tax bill on an increase in value of their home? I’ll bet you haven’t.
Great question. Sounds like a wealth tax will tax 401Ks. Yikes!
Entering the danger zone.
If tax is based on unrealized capital gains, would unrealized capital losses be deductible?
Recent rulings in some states consider gold or silver as money, so would holding gold or silver coins not be subject to market to market for tax basis? Or will holding “money” also be subject to taxes on unrealized gains?
Would the Fed also be subject to mark to market & taxes on unrealized gains or losses on gummit guaranted bonds?
One should not overlook the possibility that the $30,000 of unrealized "gain" is more likely a debasement of the purchasing power of the US Dollar due to government mismanagement. There needs to be a correction for currency debasement to normalize apparent "gains". There is a similar term "indexing for inflation" that would be applicable.
Worse, your $400,000 house appreciates to $600,000 and you pay tax on that unrealized gain. Then the house value drops to $200,000. Do you get the tax you paid back? Do you get a tax refund for the unrealized loss (from 600 to 200 or from 400 to 200)?
This is an absolute nightmare. But with a $35 trillion debt, you can bet this is high on their priority list.
I think it's more appropriate to suggest that it might run afoul of the fifth amendment takings clause.
Taxing unrealized gains is confiscatory because most people would have to divest the property in order to pay the federal tax on the property. That would effectively be the government taking the property and keeping the tax portion of its sold value, leaving the former owner with the loss of property but keeping its net value in cash.
In the case of shares of stock, the shareholder may not be ready to sell those shares because they are part of a long-term diversified portfolio of stocks and bonds, and selling shares to pay for the tax unbalances the overall portfolio.
What about homes (real estate) that appreciate in value? Will the homeowner be forced to sell the home in order to pay the tax on the unrealized appreciation on the home?
What about undeveloped land in remote areas that suddenly become popular as development finally reaches out that far? If the land rapidly appreciates because housing or industry or luxury resorts are finally being planned nearby, is the owner of the dormant land going to have to pay a tax on the unrealized appreciation on that land? Will the tax be so high as to force the owner of the land to sell it in order to pay the tax?
This is why I see this as an illegal 5th amendment takings of private property.
-PJ
It's OK. If the value of your house drops $30,000 the holy feral government gives you a rebate. </sarcasm>
>> a $14,729 tax bill
BFD
the issue concerns “the repatriation tax on profits held overseas”. This is not an issue for the average home owner, stock investor, small business owner.
That’s exactly my situation here in Kansas. Much of the farmland I bought forty years ago for $150/$200 per acre is now appraised at $4,500 per acre. I haven’t sold the land, I still farm and ranch it. If I had to pay an unrealized capital gains tax on my land I would go bankrupt, and so would every other farmer/rancher in Kansas and America too for that matter. This situation cannot stand.
It all depends on how the IRS will interpret this and enact bogus regulations and rules that supposedly implement the intent of the ruling.
My guess is that if you look at the future what wealth won’t be taxed, that’s where all the Democrats and RINOs have their money.
bkmk
Uhhh...
Dude...
This law and ruling is specifically for investments being repatriated to the US.
In other words, in plain english, overseas investments.
Do I agree with it?
NO.
But it in no way effects your home or investments here in the good old USofA.
Really people.
Reading is good for you
Tax on Unrealized Gains and Means Testing is gaining traction with the Democrats. Property Tax is already in place, it taxes you on unrealized gains.
Expect .gov to get more authoritarian as things crumble. The hunt for more tax revenue is a given with the IRS hiring 60,000 plus agents. Historically, a sign of a Nation’s decline….which commonly ends in extreme Revolt and Revolution.
Our government is out of control, they must be reeled in.
how does it affect the value of your 401k...where the RATs, for years, have been trying to get “early access” to taxes owed ?
Pay the Government forever, What happens if you have a capital loss??
According to the USSC decision on the ObamaCare tax, they could tax anything for any reason; logic and reasoning be damned.
We’re already paying tax on the unrealized gain in our homes. My property taxes have tripled in 7 years because the value of my house is perceived to have gone up.