Capital gains rate rules change in '08

Here's an interesting clarification for those that might have misunderstood the capital gains tax changes coming in 2008, from Sunday's Chronicle...

"Someone I know told me that this billionaire he knew was going to sell everything in 2008 because there will be no tax on long-term capital gains. I went online and, sure enough, there was one sentence that said the same. If this is true, isn't it big news? Shouldn't many of us begin planning to sell our assets in '08? Wouldn't that mean that a lot of real estate, private companies and stocks would be sold that year?"

John's online "discovery" includes a morsel of truth in a mountain of misunderstanding.

The morsel: The federal long-term capital gains rate in 2008 will indeed be zero, but only for people in the two lowest tax brackets and only for a limited amount of capital gains.

It is not another tax break for the rich and only a modest break for low- and middle-income people.

Check out the article for a great example calculation. This will likely only affect a small percentage of people, especially in higher-income areas like San Francisco. And her bottom line, "...that's hardly enough to plan your life around."

As always, refer to your accountant or CPA for the latest tax laws.