Capital gain tax is a tax on the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale. In the United States, capital gains are typically realized from the sale of stocks, bonds, precious metals, real estate, and property.
There are two main types of capital gains in the U.S.: short-term and long-term.
Short-Term Capital Gains: These are gains on assets held for one year or less. The tax rate for short-term capital gains is equivalent to your ordinary income tax rate, which varies based on your income level.
Long-Term Capital Gains: These are gains on assets held for more than one year. The tax rates for long-term capital gains are typically lower than short-term rates and are usually 0%, 15%, or 20%, depending on your taxable income and filing status.
Learn more about Long term Capital Gains Tax
Examples of Capital Gains in the U.S.
- Stocks and Bonds: If you buy stocks or bonds and sell them at a higher price than the purchase price, the profit is considered a capital gain.
- Real Estate: Selling a house or property at a higher price than its purchase price also results in a capital gain. However, there are exemptions for primary residences under certain conditions.
- Precious Metals and Collectibles: If you sell items like gold, silver, or collectible items at a profit, that profit is considered a capital gain.
Capital Gain Tax Rates in the U.S
- 0% rate for individuals with an income up to $40,400, or $80,800 for married couples filing jointly.
- 15% rate is for individuals with an income between $40,401 to $445,850, or $80,801 to $501,600 for married couples filing jointly.
- 20% rate applies to individuals with an income over $445,850, or over $501,600 for married couples filing jointly.
If you don’t know your gross income, you can calculate it using our Gross Income Calculator >>.
These rates can be subject to change, and other factors can influence the exact tax rate, like the type of asset or specific tax reliefs and exemptions. Always consult with a tax professional for the most accurate and personalized information
Bottom Line
Capital gain tax in the United States is a crucial aspect of the tax system. It’s impacting individuals and businesses who realize a profit from the sale of assets like stocks, real estate, and precious metals.
The tax is categorized into short-term and long-term capital gains. Each has different tax rates based on the duration of asset holding and your income level.
Long-term capital gains tax rates range from 0% to 20%, depending on income. Understanding these rates and how they apply to different types of assets is essential for effective financial planning and tax compliance.
It’s important to stay informed about potential changes in tax legislation. Consult with tax professionals to ensure accurate reporting and optimization of tax liabilities.
