September 25, 2024 • 9 mins
New tax laws coming in hot. Have you wondered what an unrealized capital gains tax could mean for you? Discover how the proposed tax changes could impact investors, from high-net-worth individuals to everyday people, and why it's crucial to stay informed even if you're not a millionaire.
Join us as we discuss this proposed change and why its not as terrible as it sounds, for now! :)
Create a STAN Store - Click here to try it out!
Here's where you can find us! Follow along on Instagram for lots of free content for business owners daily!
Shop our business guides!
Our Instagram Page
Our family page
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
If your net worth is above a certain threshold and
you're one of the people thatthey target with this then if
your value of your asset went up, you have to pay tax on that,
even if you don't sell it.
Welcome to what your CPA Wantsyou To Know.
Speaker 2 (00:20):
Tax and accounting help can be expensive, so we've
created this podcast to helpguide you through it all and
make you feel like you have aCPA in your back pocket.
Speaker 1 (00:30):
I'm Carson Sands.
Speaker 2 (00:32):
And I'm Taryn Sands.
Speaker 1 (00:33):
I'm a CPA with over 10 years of experience helping
people start and grow theirbusinesses.
Speaker 2 (00:39):
And I'm an MBA with a specialization in marketing and
entrepreneurship.
Taxes suck and we want to makesure you don't pay more than
your fair share.
Speaker 1 (00:49):
We're here to share everything your CPA wants you to
know.
Speaker 2 (00:53):
In a fun and easy to understand way.
Speaker 1 (00:56):
Let's get started.
Speaker 2 (00:57):
Let's do it.
This was actually not going tobe our episode for today, but we
keep getting lots of questionsabout this new possible tax
change, so we decided just to doa really quick episode on this
to clear up any confusion youmay have on this topic, and
(01:19):
postpone our next week's episode.
So today's episode is all aboutunrealized capital gains tax.
Yes, I keep forgetting what it'sabout, but yes, that's what
it's about.
We've had a lot of clientsfollow up and Carson's been
talking to them about whetherthis applies to them or not, so
we thought this would be a greatepisode for everyone.
(01:40):
But first, if you don'tunderstand what this is at all,
carson's going to explain whatthis is.
That way, you can determine ifthis applies to you or not.
Speaker 1 (01:49):
Okay, before I explain unrealized capital gains
tax, I want to make sureeveryone understands what
unrealized capital gains are andkind of to explain that you
kind of need to understand whatcapital gains are, or realized
capital gains.
Speaker 2 (02:02):
And you need to do it as simply as possible.
Speaker 1 (02:06):
Okay, I will try not to put everyone to sleep, so
let's make it very simple, realquick.
Let's say I buy a share ofFacebook, a stock share of
Facebook.
It goes up in value.
I paid $10 for it and now it'sworth $15.
So I have a $5 capital gain.
If I don't sell that stock it'san unrealized capital gain I
(02:27):
don't have to pay tax on thatincrease.
Speaker 2 (02:30):
Currently Until you sell it.
Speaker 1 (02:32):
Right.
If I sell it, it becomes arealized capital gain.
And then I pay tax on not the$15 that I sold but just the $5,
which is the increase from whatI originally paid for it.
I think a lot of peopleunderstand that part, but I just
wanted to make that clear.
The unrealized gains are thegains that you have in any
investments before you actuallysell them and realize the gains
(02:54):
by selling that asset.
So it's whatever the value hasincreased by since you bought it
while you're still holding ontothat asset.
And it applies to real estate,it applies to stocks, bonds,
there's all kinds of things.
It can apply to even gold andprecious metals.
Anything like that could beconsidered an unrealized capital
gain.
Speaker 2 (03:14):
And it's been brought up that they want to put a tax
on unrealized capital gains.
Speaker 1 (03:18):
That's true.
Now, first of all, I will telleveryone that the current
proposal is to put the tax onpeople whose net worth is over a
hundred million.
So for anyone that didn't justimmediately turn the episode off
, it's still important, becausemany times they start off with
the higher earners and at somepoint this was supposed to be
only people with a billiondollar net worth and then it
(03:40):
trickles down to us eventually.
But also just so you can arguewith your left-leaning friends
on this economic concept, thenit's important to understand
what it is and who it affectsand how it works.
So an unrealized capital gainstax would just mean that if your
net worth is above a certainthreshold and you're one of the
(04:01):
people that they target withthis then if your value of your
asset went up, you have to paytax on that, even if you don't
sell it.
Speaker 2 (04:10):
That kind of blows my mind, because how are they
going to track all this?
Say, you are really rich andyou have all these properties
and from one year to the nextall the values went up.
They're just going to send youa bill on their estimated value,
kind of like on our propertytaxes, exactly.
Speaker 1 (04:25):
Now I know most family farms aren't worth $100
million, but let's use that asan example.
But let's say it's.
I don't know the Kellogg family.
Let's say they own a lot ofwheat farms.
I don't even know if that'strue, let's just pretend like it
is.
And so they own I don't knowall of the Midwest, so that they
have quite a bit of farmlandand, yes, they have a lot of
(04:46):
money too.
But the value of their land isgoing to increase every year,
because that's what land does,and most years anyway.
And now, all of a sudden,they're going to have to pay tax
on however much the value oftheir land went up.
Even though they didn't sell it, they're still using it to, you
know, to grow food and stuff.
Speaker 2 (05:05):
Right.
Which is why I think this isbecoming such an issue with
people is because it soundspretty crazy.
Speaker 1 (05:11):
It does.
And let me give you two moreexamples, because I do want to
be fair and say the pros andcons.
So let's say there's a personthat inherited all their money
and they're sitting on $250million in stocks and
investments and they don't work.
They just haven't invested andthey never pay tax because even
when they need money to buythings, they don't go and sell
(05:33):
some of those stocks to turnaround and go buy things.
Usually what they do is they goget a loan against the stock
from their own investmentcompany, essentially, and so
they take that money and theybuy the things that they want
and then they slowly pay thatloan back over time, and what
that allows them to do is to notactually have to pay tax on the
capital gains and still get useof that money.
(05:56):
And that's something that a lotof people don't like, and I can
kind of understand that,because it is cheating the
system a little bit.
And on the flip side you haveanother example, like, let's say
, elon Musk.
He doesn't own hardly anythingexcept for the companies that he
owns the majority of anddoesn't really invest his money
in stocks.
Let's say At least that's whatpeople say so the value of Tesla
(06:19):
and SpaceX goes through theroof.
Well, now he's having to sellshares of a company that he owns
majority stakes in to pay thistax bill for his unrealized
gains, and that one doesn't seemfair to me, because now he
could lose control of thosecompanies by selling off shares
to pay for this tax.
So that really doesn't seem asfair as the first example, where
(06:41):
it's somebody that's justsitting there watching their
stocks grow.
It's companies they don't careabout, they don't even
participate in the operations of, they just own some small
percentage of the shares I mean.
So those are the two argumentsthat people are making.
Speaker 2 (06:56):
So it's not going to affect as many people as are
asking us about it.
Obviously because there's thatreally high income threshold,
but how likely is it that thisis even going to be an issue If?
Speaker 1 (07:09):
Certain people get elected, it's one of their top
priorities that they want thebill to be pushed through and
become a law and everything.
So I mean it could definitelyhappen Now.
Will it affect most of thepeople listening to this podcast
?
No, because currently theproposal at least says that it's
for people that have a networth of over $100 million.
Well, I think it will affecteveryone, but it will not
(07:31):
directly affect anyone whodoesn't have a net worth over
$100 million, so you don't needto panic about it.
But whenever people are makingtheir arguments pro or con
against this, I just want themto know the facts of exactly how
it's going to work.
And I mean, and that's the wayit works, they will tax you on
money that you don't actuallynecessarily have.
(07:52):
You on money that you don'tactually necessarily have.
Now, if they're worried aboutthe people that are using margin
loans and things like that fromtheir investments, then they
could tax just that, or theycould come up with another way
to stop that.
They could make a rule whereyou can't do that, where they
don't punish everyone else who'sjust trying to grow a company
or grow a business.
So I don't know.
I think there's a lot ofsolutions that don't involve
(08:14):
taxing every single person whohas unrealized capital gains and
has a high net worth.
Speaker 2 (08:19):
Right, and I mean there could be a lot of changes
made before this ever actuallyhappens, or it could not happen
at all, so we really just don'tknow at this point, but it's
definitely a hot topic right now.
Speaker 1 (08:30):
So if you're arguing with your brother-in-law about
this or with your uncle at afamily event, at least now
you'll have the facts and youwon't sound stupid.
Speaker 2 (08:39):
Well, there you go.
We do have an episode coming uptowards the end of this year
that's going to be all about taxchanges that you do need to
know.
That will apply to most people.
That will be for the upcomingtax season, so stay tuned for
that.
Speaker 1 (08:56):
Yes, and those will be things that actually have
already passed or are very, verylikely to pass and be
retroactive to 2024.
Speaker 2 (09:03):
Yes, That'll be the information that you actually do
need to know when you go tofile your 2024 tax return.
So we apologize if this waslike a super boring episode, but
it definitely has been comingup a lot and we try to pay
attention to that and getepisodes out.
If there's something you wouldlike us to cover, just send us a
DM on Instagram.
Until next time.
(09:23):
Thank you so much for listeningto.
Speaker 1 (09:26):
What your CPA Wants you To Know.
Speaker 2 (09:28):
Podcast.
Speaker 1 (09:40):
This podcast is intended to provide accounting
and tax information foreducational purposes only.
All tax situations are uniqueand should be handled with the
assistance of a tax professional.
If your net worth is above a certain threshold and
you're one of the people thatthey target with this then if
your value of your asset went up, you have to pay tax on that,
even if you don't sell it.
Welcome to what your CPA Wantsyou To Know.
Speaker 2 (00:20):
Tax and accounting help can be expensive, so we've
created this podcast to helpguide you through it all and
make you feel like you have aCPA in your back pocket.
Speaker 1 (00:30):
I'm Carson Sands.
Speaker 2 (00:32):
And I'm Taryn Sands.
Speaker 1 (00:33):
I'm a CPA with over 10 years of experience helping
people start and grow theirbusinesses.
Speaker 2 (00:39):
And I'm an MBA with a specialization in marketing and
entrepreneurship.
Taxes suck and we want to makesure you don't pay more than
your fair share.
Speaker 1 (00:49):
We're here to share everything your CPA wants you to
know.
Speaker 2 (00:53):
In a fun and easy to understand way.
Speaker 1 (00:56):
Let's get started.
Speaker 2 (00:57):
Let's do it.
This was actually not going tobe our episode for today, but we
keep getting lots of questionsabout this new possible tax
change, so we decided just to doa really quick episode on this
to clear up any confusion youmay have on this topic, and
(01:19):
postpone our next week's episode.
So today's episode is all aboutunrealized capital gains tax.
Yes, I keep forgetting what it'sabout, but yes, that's what
it's about.
We've had a lot of clientsfollow up and Carson's been
talking to them about whetherthis applies to them or not, so
we thought this would be a greatepisode for everyone.
(01:40):
But first, if you don'tunderstand what this is at all,
carson's going to explain whatthis is.
That way, you can determine ifthis applies to you or not.
Speaker 1 (01:49):
Okay, before I explain unrealized capital gains
tax, I want to make sureeveryone understands what
unrealized capital gains are andkind of to explain that you
kind of need to understand whatcapital gains are, or realized
capital gains.
Speaker 2 (02:02):
And you need to do it as simply as possible.
Speaker 1 (02:06):
Okay, I will try not to put everyone to sleep, so
let's make it very simple, realquick.
Let's say I buy a share ofFacebook, a stock share of
Facebook.
It goes up in value.
I paid $10 for it and now it'sworth $15.
So I have a $5 capital gain.
If I don't sell that stock it'san unrealized capital gain I
(02:27):
don't have to pay tax on thatincrease.
Speaker 2 (02:30):
Currently Until you sell it.
Speaker 1 (02:32):
Right.
If I sell it, it becomes arealized capital gain.
And then I pay tax on not the$15 that I sold but just the $5,
which is the increase from whatI originally paid for it.
I think a lot of peopleunderstand that part, but I just
wanted to make that clear.
The unrealized gains are thegains that you have in any
investments before you actuallysell them and realize the gains
(02:54):
by selling that asset.
So it's whatever the value hasincreased by since you bought it
while you're still holding ontothat asset.
And it applies to real estate,it applies to stocks, bonds,
there's all kinds of things.
It can apply to even gold andprecious metals.
Anything like that could beconsidered an unrealized capital
gain.
Speaker 2 (03:14):
And it's been brought up that they want to put a tax
on unrealized capital gains.
Speaker 1 (03:18):
That's true.
Now, first of all, I will telleveryone that the current
proposal is to put the tax onpeople whose net worth is over a
hundred million.
So for anyone that didn't justimmediately turn the episode off
, it's still important, becausemany times they start off with
the higher earners and at somepoint this was supposed to be
only people with a billiondollar net worth and then it
(03:40):
trickles down to us eventually.
But also just so you can arguewith your left-leaning friends
on this economic concept, thenit's important to understand
what it is and who it affectsand how it works.
So an unrealized capital gainstax would just mean that if your
net worth is above a certainthreshold and you're one of the
(04:01):
people that they target withthis then if your value of your
asset went up, you have to paytax on that, even if you don't
sell it.
Speaker 2 (04:10):
That kind of blows my mind, because how are they
going to track all this?
Say, you are really rich andyou have all these properties
and from one year to the nextall the values went up.
They're just going to send youa bill on their estimated value,
kind of like on our propertytaxes, exactly.
Speaker 1 (04:25):
Now I know most family farms aren't worth $100
million, but let's use that asan example.
But let's say it's.
I don't know the Kellogg family.
Let's say they own a lot ofwheat farms.
I don't even know if that'strue, let's just pretend like it
is.
And so they own I don't knowall of the Midwest, so that they
have quite a bit of farmlandand, yes, they have a lot of
(04:46):
money too.
But the value of their land isgoing to increase every year,
because that's what land does,and most years anyway.
And now, all of a sudden,they're going to have to pay tax
on however much the value oftheir land went up.
Even though they didn't sell it, they're still using it to, you
know, to grow food and stuff.
Speaker 2 (05:05):
Right.
Which is why I think this isbecoming such an issue with
people is because it soundspretty crazy.
Speaker 1 (05:11):
It does.
And let me give you two moreexamples, because I do want to
be fair and say the pros andcons.
So let's say there's a personthat inherited all their money
and they're sitting on $250million in stocks and
investments and they don't work.
They just haven't invested andthey never pay tax because even
when they need money to buythings, they don't go and sell
(05:33):
some of those stocks to turnaround and go buy things.
Usually what they do is they goget a loan against the stock
from their own investmentcompany, essentially, and so
they take that money and theybuy the things that they want
and then they slowly pay thatloan back over time, and what
that allows them to do is to notactually have to pay tax on the
capital gains and still get useof that money.
(05:56):
And that's something that a lotof people don't like, and I can
kind of understand that,because it is cheating the
system a little bit.
And on the flip side you haveanother example, like, let's say
, elon Musk.
He doesn't own hardly anythingexcept for the companies that he
owns the majority of anddoesn't really invest his money
in stocks.
Let's say At least that's whatpeople say so the value of Tesla
(06:19):
and SpaceX goes through theroof.
Well, now he's having to sellshares of a company that he owns
majority stakes in to pay thistax bill for his unrealized
gains, and that one doesn't seemfair to me, because now he
could lose control of thosecompanies by selling off shares
to pay for this tax.
So that really doesn't seem asfair as the first example, where
(06:41):
it's somebody that's justsitting there watching their
stocks grow.
It's companies they don't careabout, they don't even
participate in the operations of, they just own some small
percentage of the shares I mean.
So those are the two argumentsthat people are making.
Speaker 2 (06:56):
So it's not going to affect as many people as are
asking us about it.
Obviously because there's thatreally high income threshold,
but how likely is it that thisis even going to be an issue If?
Speaker 1 (07:09):
Certain people get elected, it's one of their top
priorities that they want thebill to be pushed through and
become a law and everything.
So I mean it could definitelyhappen Now.
Will it affect most of thepeople listening to this podcast
?
No, because currently theproposal at least says that it's
for people that have a networth of over $100 million.
Well, I think it will affecteveryone, but it will not
(07:31):
directly affect anyone whodoesn't have a net worth over
$100 million, so you don't needto panic about it.
But whenever people are makingtheir arguments pro or con
against this, I just want themto know the facts of exactly how
it's going to work.
And I mean, and that's the wayit works, they will tax you on
money that you don't actuallynecessarily have.
(07:52):
You on money that you don'tactually necessarily have.
Now, if they're worried aboutthe people that are using margin
loans and things like that fromtheir investments, then they
could tax just that, or theycould come up with another way
to stop that.
They could make a rule whereyou can't do that, where they
don't punish everyone else who'sjust trying to grow a company
or grow a business.
So I don't know.
I think there's a lot ofsolutions that don't involve
(08:14):
taxing every single person whohas unrealized capital gains and
has a high net worth.
Speaker 2 (08:19):
Right, and I mean there could be a lot of changes
made before this ever actuallyhappens, or it could not happen
at all, so we really just don'tknow at this point, but it's
definitely a hot topic right now.
Speaker 1 (08:30):
So if you're arguing with your brother-in-law about
this or with your uncle at afamily event, at least now
you'll have the facts and youwon't sound stupid.
Speaker 2 (08:39):
Well, there you go.
We do have an episode coming uptowards the end of this year
that's going to be all about taxchanges that you do need to
know.
That will apply to most people.
That will be for the upcomingtax season, so stay tuned for
that.
Speaker 1 (08:56):
Yes, and those will be things that actually have
already passed or are very, verylikely to pass and be
retroactive to 2024.
Speaker 2 (09:03):
Yes, That'll be the information that you actually do
need to know when you go tofile your 2024 tax return.
So we apologize if this waslike a super boring episode, but
it definitely has been comingup a lot and we try to pay
attention to that and getepisodes out.
If there's something you wouldlike us to cover, just send us a
DM on Instagram.
Until next time.
(09:23):
Thank you so much for listeningto.
Speaker 1 (09:26):
What your CPA Wants you To Know.
Speaker 2 (09:28):
Podcast.
Speaker 1 (09:40):
This podcast is intended to provide accounting
and tax information foreducational purposes only.
All tax situations are uniqueand should be handled with the
assistance of a tax professional.
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com