How to calculate your capital gains tax bracket
With higher standard deductions and income thresholds for capital gains, it's more likely you'll fall into the 0% bracket in 2023, Lucas said.
For 2023, you may qualify for the 0% long-term capital gains rate with taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly.
The rates use "taxable income," which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
For example, if a married couple makes $100,000 together in 2023, their taxable income may easily fall below $89,250 after subtracting the $27,700 married filing jointly standard deduction.
By comparison, you may have been in the 0% long-term capital gains bracket for 2022 with a taxable income of $41,675 or less for single filers and $83,350 or less for married couples filing jointly.
With taxable income below the thresholds, you can sell profitable assets without tax consequences. For some investors, selling may be a chance to diversify amid market volatility, Lucas said.
"It's there, it's available and it's a really good tax-planning opportunity," he added.
Whether you're taking gains or tax-loss harvesting, which uses losses to offset profits, "you really have to have a handle on your entire reportable picture," said Jim Guarino, a CFP, certified public accountant and managing director at Baker Newman Noyes in Woburn, Massachusetts.
That includes estimating year-end mutual fund payouts in taxable accounts — which many investors don't expect — and may cause a surprise tax bill, he said.
"Some additional loss harvesting might make a lot of sense if you've got that additional capital gain that's coming down the road," Guarino said.
Of course, the decision hinges on your taxable income, including payouts, since you won't have taxable gains in the 0% capital gains bracket.
Source: Here’s who qualifies for 0% capital gains taxes for 2023
https://www.creconsult.net/market-trends/heres-who-qualifies-for-0-capital-gains-taxes-for-2023/
Through the 504 Loan, 40% of the total project costs must come from the SBA. 50% of the total project costs come from the participating lender. Borrowers of 504 loans contribute a further 10% of the project costs, but in rare circumstances, the borrower may be required to contribute 20% of project costs.
504 loans have fixed-rate interest rates, long loan amortization, and no balloon payments. Compared to other loans, 504 loans offer savings that result in improved cash flow. The maximum loan amount is $5 million, or $5.5 million for small manufacturers or certain types of energy projects.
For every $65,000 borrowed, businesses must make one job or retain one job. The exception to this is small manufacturers. These businesses are held to a ratio of one job for every $100,000. Businesses that will not create or retain jobs may still borrow an SBA 504 loan under certain circumstances, as long as the CDC maintains acceptable job creation or retention overall.
Businesses must be for-profit entities and must be the correct size according to the SBA.
Businesses with a tangible net worth of over $15 million are not eligible. An average net income at or below $5 million after federal income taxes is also required. Businesses must have this average net income for the two years just before application. Nonprofit organizations and businesses engaged in passive or speculative activities do not qualify for the 504 loans. CDCs can help businesses in their geographic region determine whether they qualify.
Businesses can finance almost any type of commercial property as long as its owner-occupied and are part of their business.
What can an SBA 504 loan be used for?
For a $1,000,000 activity, 504 project costs may be used for the following activities:
Buying land
Purchase of a building
Renovation of an existing building
Purchase of furniture and equipment
Soft costs
Proceeds from 504 loans must be used for fixed assets and some soft costs.
Land improvements (such as grading, utilities, street improvements, landscaping and parking lots)
New building construction
Long-term machinery
Modernization of an existing building
Conversion of an existing building
Debt refinancing in connection with business expansion through construction of new facilities, purchasing of new equipment, or renovation of existing facilities
It's important to note that the SBA 504 program cannot be used for purposes relating to inventory or working capital, consolidation of debt, or repayment of the debt, except for projects as described above.
SBA 504 loans are amortized over 10, 20, or 25 years. Borrowers can work with their CDC and lender to determine which repayment schedule works for them.
Project assets are used as collateral. Personal guarantees may also be required.
SBA 504 loan rates correlate to the current market rate for 10-year and 5-year U.S. Treasury issues. 20 and 10-year loan maturities are available.
No, you can't refinance an SBA 504 loan. However, there is a 504 refinancing program offered by the SBA, which allows business owners to refinance an existing commercial loan. The loan being refinanced cannot be any type of SBA loan.
85% of the original business loan should match the qualifications for an SBA 504 loan, and the remaining 15% of the loan must have been used to benefit the company. The original loan must be no less than two years old. To refinance, borrowers must make a 15% down payment, and eligible assets must be used as collateral.
Businesses less than two years old are not eligible to refinance. Businesses cannot refinance to expand their business, although they muse a standard 504 loan to promote their own business growth. Getting a 504 refinancing loan is a very similar process to getting a 504 loan. To start, the business must work with a CDC and private lender to obtain the loan
Source: SBA 504 Commercial Real Estate Loans
https://www.creconsult.net/market-trends/sba-504-commercial-real-estate-loans/
When it comes to selling their investment properties, clients typically ask me,’ Why should I sell?’ Great question. Why should you sell? The obvious answer is that you purchased the investment property as an investment, and it may not be doing as well as other investment opportunities, and after a while, you don’t realize the appreciation and thus maximization of profit from the property until you sell and acquire another investment property. So the question is really, ‘When should I sell? Clients really lose the perspective of the driving reason why they invested in an investment property in the first place. An investment property is just that; an investment. Treated as such, every investment must have a horizon and an exit strategy. If a property was purchased as an investment, then it makes full sense to profit as much as possible from the investment.
The real estate market, like any other market, will go through peaks and valleys. Trying to predict the exact moment of peak or the exact moment the market reaches the bottom is practically impossible. The real estate cycle has four phases; recovery, expansion, hyper supply, and recession. The complete real estate market cycle seems to have an average duration of about 18 years as there is good historical data to support that. So, where are we in that cycle now? How much more upside will we see before we reach the peak? The question really is, ‘What is your appetite for risk?’
Below is a chart of the real estate cycles dating back from the 1800s. The last real estate market crash started at 2006. We are almost 16 years into that cycle. Interest rates are still at all-time lows. Money is cheap, and the threat of inflation is very high. How long can government print money without paying the price down the road? How much road do we have left?
So when is a good time to exit an investment property? As with everything else, real estate is cyclical. Those of us that have been around for some time have witnessed several cycles in the real estate market. Since it is practically impossible to predict the peak of cycles, what strategy should you then use to maximize your investments? Keeping it simple, when evaluating if you should consider selling an investment property, it doesn’t really matter what the current real estate market is like. If you are looking to replace the investment property with another investment property, the ultimate decision to sell should also be based upon if you can increase your returns with the new replacement property, not what state the current market is in now.
There are a number of factors that can impact real estate prices; availability, investment potential, and interest rates, to name a few. Interest rates impact the price and demand of real estate—lower rates bring in more buyers due to the lower cost of money but also expand the demand for real estate, which can then drive up prices. As interests rate starts to inch up, the cost of money increases, and thus the appetite for real estate investments declines.
However, there are many ways that one can still protect their investments. 1031 Exchanges give investors a vehicle to reposition assets and mitigate risk. There are certain asset classes that inherently hold less risk and still perform as an investment vehicle. The questions really come down to; ‘How long do I hold on during this cycle? Do I have the time horizon to outlast another cycle? Is it time to reposition and take advantage of 1031?
As part of the team for our client’s investments, we specialize in building solutions around our client’s needs. We analyze the requirements, crunch the data, and present assets entirely based on their circumstances and the goals they are trying to achieve with their investment.
Source: Should I Sell or Should I Hold? When is the best time for asset repositioning?
https://www.creconsult.net/market-trends/should-i-sell-or-should-i-hold-when-is-the-best-time-for-asset-repositioning/
Wages are not rising fast enough for many Chicago renters. Head to the suburbs, right? In some Chicago suburbs, rents are actually more expensive.
Chicago apartment dwellers are seeing some of the fastest rental price increases in the nation this spring and summer, reports a new market study.
A typical one-bedroom unit in downtown Chicago now leases for a hefty median rent of $1,840 a month – the second most expensive city in Illinois, according to Zumper’s Chicago Metro Area Report.
Renters who are thinking of heading to the suburbs for some financial relief should look at the Zumper numbers. Compared with the city, rents actually are more expensive in some Chicago suburbs.
The most expensive town to rent an apartment in the state is west suburban Lombard, which posted a one-bedroom median rent of $2,030, up a whopping 37.2 percent since last year.
“The reality is that multifamily apartment rents are rising everywhere – and fast,” said the Zumper report.
One way for renters to save some bucks is lease a compact apartment in downtown Chicago, which is known for offering some of the tiniest newly-built apartments in the nation, reports RentCafe.com, a nationwide apartment search website and part of the Yardi network.
“In the Windy City, a monthly rent of $1,500 will only lease you an average of 502 square feet of apartment space – the equivalent of a studio or one-bedroom unit,” the RentCafé report said.
Nationally, a monthly rent of $1,500 will lease you an average of 782 square feet of apartment space. Currently, Chicago is the 15th most popular rental apartment city in the United States, according to RentCafé. In May, renters found Chicago more appealing than such major cities as Washington, D.C., Boston, Seattle, Charlotte, or Houston.
The Home Front found the following assortment of available rentals in lakefront neighborhoods on Apartment List:
Lincoln Park. There are 285 units currently listed for rent in this neighborhood. At the Belden Stratford, 2300 North Lincoln Park West, renters can choose from 109 available units in the renovated former hotel. Studios with 556 square feet go for $2,610. One-bedroom units with 683 square feet rent for $2,818. Deluxe two-bedroom layouts with 1,043 square feet lease for $5,112 a month.
For renters who can’t afford luxury apartments downtown or in lakefront neighborhoods such as Edgewater, Lakeview, Lincoln Park, and Old Town, some nice units are located in the first ring of neighborhoods outside downtown, noted Ron DeVries, senior managing director of Integra Realty Resources, a consulting and appraisal firm.
For example, in North Lincoln Square, apartment hunters will find a nicely renovated one-bedroom unit in a walk-up building priced at $1,350 a month. The two-bedroom layout with off-street parking included is renting for $1,450.
However, rents in some off-the-lake North Side neighborhoods also have risen 11-13 percent in the past year because of sharply higher real estate taxes, Realtors say.
For many, rents rising faster than wages
The big problem for Chicago renters in 2023 is that wages are not rising fast enough for many tenants to afford the median-rent apartment, according to a new report from Housing Action and the National Low Income Housing Coalition.
To afford a typical two-bedroom apartment in Chicago, a renter who works 40 hours a week needs to earn $27.69 per hour, or $57,600 per year. To afford a one-bedroom unit, a tenant who works a 40-hour week would need to earn $24.13 per hour, or $50,190 per year.
The minimum hourly wage in Chicago increases every year and is set to rise another 40 cents on July 1, reaching $15.80 an hour for non-tipped workers at the city’s largest employers.
The report said the average fair market rent for a one-bedroom apartment in Chicago currently is $1,255 per month, while two-bedroom layouts lease for an average of $1,440.
Source: Apartment rents in Chicago and Illinois are rising fast
https://www.creconsult.net/market-trends/apartment-rents-in-chicago-and-illinois-are-rising-fast/
Have the money to buy a home? If you follow through, it may not be money well spent.
For generations, Americans have thought of homeownership as a hallmark of success. Even today, 74% of U.S. adults say owning a home is a cornerstone of the American dream — ranking higher than milestones like retiring, having a good career, getting a college degree or having kids, according to a recent Bankrate poll.
But there are reasons not to buy a home, even for those who can afford to do so.
“I don’t think it should be an automatic for everyone,” said certified financial planner Jude Boudreaux, senior financial planner with The Planning Center in New Orleans and a member of CNBC’s Financial Advisor Council. “You could live your whole financial life renting and be very happy.”
Here are three reasons it may be smarter to rent.
1. You're unsure about the long term
Prospective homebuyers should have conviction about where they want to live, said Kamila Elliott, a CFP based in Atlanta and a member of CNBC's Advisor Council.
For example, would they enjoy living for several years in a particular city or suburb, or in a specific neighborhood? If they had relocated for a job, would they still want to live there if they lost that job?
If the answer to any of those questions is no, renting is likely best, said Elliott, co-founder and CEO of Collective Wealth Partners.
"If you can't commit to being there [at least] three years, don't buy," said Elliott.
Flexibility is a big plus for renters, Boudreaux said.
For example, if you move to an unfamiliar place, "renting can be a nice pathway," he noted, in order to avoid buying and then discovering you don't like the location.
The benefits can be both psychological and financial.
Home prices can be volatile, making it more likely a buyer wouldn't make a profit if selling after just a short period of ownership, Elliott said.
Upfront transaction costs like realtor's fees are also generally "very expensive," making it harder to break even on a short-term home purchase, Boudreaux said.
There's also a certain lifestyle benefit to renting instead of buying, advisors said.
Renters don't have to deal with the "nuisance factor" of scheduling appointments with landscapers and exterminators or paying for home repairs, Elliott said. That's typically a landlord's responsibility.
"You don't have to worry about fixing the dishwasher, garage door, or HVAC unit," Elliott said.
Depending on the building, renters may feel safer if there are additional security cameras or a doorman, or get convenience and social benefits if there are amenities like a gym or pool, she added.
Conversely, a house may be the right lifestyle choice for someone who wants a big yard with a nice garden and room for a dog to run around, Boudreaux said.
Richard Newstead | Moment | Getty Images
The financial benefits of homeownership are "vastly overstated," Boudreaux said.
"Buying a home because you feel it's the thing you should do can be [financially] dangerous" and lead to regret, he added.
For one, a financial assessment of affordability is incomplete if consumers only compare monthly rent and mortgage costs. The true cost of homeownership also includes costs for utilities, home improvements and maintenance, property taxes, and homeowners insurance, advisors said.
The average homeowner paid more than $15,000 a year in addition to their mortgage to cover these costs in 2022, according to Clever Real Estate.
Secondly, a tax deduction for mortgage interest isn't as valuable as it once was, Boudreaux added.
A 2017 tax law passed during the Trump administration reduced the mortgage interest threshold; married couples can claim a tax deduction on the first $750,000 of their mortgage, down from $1 million.
In a general sense, it's also more difficult to get the financial benefits of a tax deduction. The law doubled the standard deduction (it's $27,700 in 2023 for married couples) and capped a deduction for state and local taxes at $10,000.
Taken together, a tax break for mortgage interest "is not the benefit it used to be," Boudreaux said.
Of course, owning a home is often seen as an investment, as well as securing a place to live.
Homeownership "allows families to build wealth and serves as a measure of financial security," according to a 2018 paper by Laurie Goodman of the Urban Institute and Christopher Mayer of Columbia University. Home equity can play an important role in retirement savings, for example, if retirees are able to tap that wealth, they wrote.
But there are "substantial variations" in homeowner experience based on factors like purchase timing, holding period and location, they said.
For example, wealth building depends on one's ability to hold on to a home during downturns; lower-income and minority borrowers are less likely to do so, and thus benefit less from homeownership, Goodman and Mayer wrote. Additionally, homeowner returns "have been less favorable" in areas like Cleveland and Chicago relative to other metro areas like Los Angeles, Dallas and New York.
Historically, residential real estate returns and those of stocks have been "very similar and high," according to a paper published by the Federal Reserve Bank of San Francisco, which examined global investments from 1870 to 2015.
But in the U.S., investors have gotten a better net return on stocks relative to housing during that time: 8.3% versus 6% a year, on average, after accounting for inflation, according to the paper.
Source: 3 reasons it can be smarter to rent, even if you can afford to buy
https://www.creconsult.net/market-trends/3-reasons-it-can-be-smarter-to-rent-even-if-you-can-afford-to-buy/
