Full Definition
Capital gains tax applies to profits from selling investment assets held over one year (long-term). For commercial real estate investors, long-term capital gains rates are 0%, 15%, or 20% depending on income, plus a 3.8% Net Investment Income Tax (NIIT). Additionally, depreciation recapture is taxed at 25%.
Related Terms
1031 Exchange (Like-Kind Exchange)
IRS-approved strategy allowing investors to defer capital gains taxes by reinvesting proceeds from sold investment property into like-kind property.
Depreciation Recapture
Tax levied on the gain from depreciation previously claimed on an investment property, at a maximum 25% federal rate.