How will my Assets be Valued?

An asset’s value is not static!

When an asset’s value has substantially appreciated over time… that’s a good thing! But when it comes time to sell that highly appreciated asset, there can be a large capital gains tax to pay… and that’s a bad thing! (Unless you’re “Uncle Sam”)

Generally, an asset receives a “step up” in basis when it’s transferred into an estate. A step up in basis means that the asset is revalued at it’s Fair Market Value as of the decedent’s date of death versus it’s original cost to you when it was acquired ‘way back when’. So, that’s a big plus for inheritance!

Assets can also achieve a step up in basis by passing through Trusts, as well as many other valuable considerations and safeguards, they otherwise wouldn’t have.

Cost Basis can go up or down…

There are many other factors that can affect the cost basis of an asset. More specifically, there are many different factors that can affect the taxable cost basis of an asset. Some factors make your cost basis go up. Some factors can make your cost basis go down.

Any improvements made to your home over the years are added to the original purchase price to create a higher cost basis for when you sell.

If you’ve owned a rental property and depreciated it over time, you’ve had the nice benefit of taking the depreciation expense. For the time you’ve owned that rental property, depreciation has helped you pay less in tax. In many instances, much less in tax. But the downside comes when you finally sell that rental property. Many people don’t realize they then must “recapture” all that depreciation that gave them those wonderful tax deductions in the past. Now, the cost basis is lowered by the accumulated depreciation and the gain is increased upon sale. Does that mean there’s nothing that can be done? Au contraire… there are strategies aplenty to reduce capital gains tax. That’s where we come in!

As tax laws are complex and ever changing… it is important to speak with a tax professional if you have assets that have appreciated (or depreciated) over time.