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How do people avoid these? Do they do something special to offset them? Is there anything a regular(poor) person can do. I was told they are in excess of 30%. Is that true?
There are short term capital gains and long term capital gains - a different rate for the latter which can be 13% less. Long term is an investment held for 12 months or longer.
It can be a good thing to pay a fortune in capital gains, because that means you are making a lot of money and will get to keep 2/3 of it. Better to make money and pay taxes than to make nothing and not pay taxes I say!
Also you can trade within an IRA account and avoid capital gains. Traditional taxed at regular income rate at time of withdrawal, ROTH IRA not taxed at all!
If you are selling real estate, check with a CPA.
You can also invest in stocks which pay high dividend yields instead of buying/selling short term. Go to the following site and move the "Div yield (%)" slider to the right to find stocks which pay the most % yield dividends. (Be sure they have consistently paid dividends for the last several years! Not just one big dividend recently.) Google Finance: Find top stocks with our stock screener
It's not stock profits or anything like that. It's mineral rights.
Oil companies pay me to lease rights I own and I get a small percentage, royalty, on the oil and gas they extract. The big chunk of change comes in when I agree to a new lease. The leases are usually for 2 years with a 2 year extension option.
The mineral rights have been in my H's family for generations and now they are mine. It didn't take me long to find out they were also grossly underpaid, probably because they were doing business with 'friends'.
I figure since the leases were mismanaged, there's also a possibility they were overpaying on taxes too.
If you just inherited these, then the current value (basis) at the time you inherited the mineral rights is the "starting point" for you. Talk to a CPA about establishing a "basis" for these.
As for signing a new lease which brings you more income, you are not "selling" the mineral rights, so I don't think that would be capital gains.
This would be like owning a rental house. If you sell the house for more than what you paid for it (basis), then there would be capital gains. But if you just get higher rent, then not capital gains.
Anyway oil has all sorts of special tax rules. Like "depletion". Best to talk to a CPA who is familiar with the oil industry.
If you just inherited these, then the current value (basis) at the time you inherited the mineral rights is the "starting point" for you. Talk to a CPA about establishing a "basis" for these.
As for signing a new lease which brings you more income, you are not "selling" the mineral rights, so I don't think that would be capital gains.
This would be like owning a rental house. If you sell the house for more than what you paid for it (basis), then there would be capital gains. But if you just get higher rent, then not capital gains.
Anyway oil has all sorts of special tax rules. Like "depletion". Best to talk to a CPA who is familiar with the oil industry.
I will! Sounds like I need lots of help.
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