Higher Capital Gains Tax Rates
Business owners contemplating the sale of their business should consider the proposed tax rate hikes beginning in 2011. As a first step, business owners should consult tax advisors about the significant adverse impact that the proposed tax rates will have on after tax sale proceeds.
Bush era tax cuts scheduled to expire at the end of this year will cause long-term capital gain rates on higher income taxpayers to rise from 15% to 20% for years after 2010. In addition, the U.S. House of Representatives has proposed a surtax of 5.4% on the income of high income taxpayers. Assuming the 15% rate is not extended and the 5.4% surtax is enacted, the combined Federal tax rate on capital gains will rise from 15% to 25.4%, an increase of 69.33%.
Business sellers need to know about the proposed changes in tax legislation. Most business owners will be amazed to see the calculation the tax increase will have on their sale price. Planning for this proposed tax change is likely to cause more businesses owners to strongly consider selling their business so the sale can be closed in 2010.
The higher tax rate is not the only factor you should consider when to sell your business, but it is an important one. Owners who make the decision to sell in 2010 need to start the process sooner rather than later in order to increase the possibility of closing in 2010.
Posted by steve boylan 
