Capital gains tax

I had a thought about capital gains tax.  I don't think there should be a capital gains tax on your main house or even a second house.  Most people with a second home have it as a vacation home, not as an investment property.  However if you are trying to make money selling houses, and that is your main source of income, you should probably be taxed like the rest of the working public.

The US is actually going through a major capital gains tax reform.

I'll start by explaining that there are two types of capital gains, in the eyes of the US government.  A long term property is sold after a year of purchase and a short term property is sold within a year of purchase.

Up until 2007, short term capital gains are taxed in your respective tax bracket.  If you were in the bottom two tax brackets (10% and 15%), long term gains carried a 5% tax.  A 15% tax was given to those long term gains for individuals in the other tax brackets.

From 2008-2012, all short term capital gains are taxed the same as previously stated.  Long term gains for individuals above the 15% bracket are also taxed the same.  Interestingly, if you fall in the bottom two tax brackets, your capital gain carries a 0% tax until 2012.  If you are married that is under $68,000. If you sell your house before 2012, you have zero capital gains tax.

Starting in 2013, all of that changes.
The tax brackets are no longer 10, 15, 25, 28, 33 and 35%.
The 10% and 25% brackets will be eliminated.  New brackets will be 15, 28, 31, 36 and 39.6%.

As before, all short term gains are placed into the respective tax bracket.  Long term gains will be taxed 10% for the 15% bracket and 20% for all other brackets.

Here is the wikipedia link if you would like to read it yourself.

Here is a good link on the current debt problem.