This week, we take a look at questions about tax rates and bank deposits, as answered by one of our regular "Ask the Experts" columnists.
To see more answers posted by our regular lineup of local experts, go to www.sacbee.com/ask.
Jeff Lambert, certified financial planner
Where is a safe place to temporarily hold about $600,000 from the sale of my house? I would like to put all the money in one place on a month-to-month basis to earn enough interest to make a rental payment.
However, the limits on FDIC coverage limit the amount I can safely deposit in a bank or credit union. I want the money as liquid as possible so I can move quickly when there's a good deal on a new house.
As you know, FDIC coverage is limited to $100,000 per account. In order to have full protection over your $600,000, you will need to open six accounts with different owner/ beneficiaries at your bank or open separate accounts at six different institutions.
There are alternatives.
You could put all of the $600,000 in a money market mutual fund, which is highly liquid and posts monthly interest. Although it doesn't have FDIC coverage, money market funds rarely fail.
Or you could open an account at a brokerage firm and let a broker buy CDs at different banks for you. The CDs will be covered by the FDIC.
Your choice really depends on your comfort level and where you want your accounts.
I own some duplexes in Sacramento, which I'll be selling in the next few years when the market stabilizes. What is the latest news on capital gains taxes? I heard a big change is coming in 2011.
The current federal capital gains rate of 15 percent is scheduled to return to the 20 percent level in 2011.
But tax rules change frequently. Given that the federal budget is running at a deficit and capital gains are mostly paid by wealthy taxpayers, many analysts do not expect capital gains rates to stay at their historically low level. In fact, many expect they'll go up in 2009.
Therefore, chances are high that you will pay lower taxes on your duplex if you sell sooner rather than later.
But your plans should not be driven solely by your desire to pay less in taxes. The crucial decision is really whether you want to continue owning and managing real estate.
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