Capital Gains Tax Rate

Investor Economic and Financial Education

Capital Gains Tax Rate

A capital gain is a profit resulting from investments into a capital asset, such as stocks, bonds or real estate, which exceed the purchase price.    It is basically the difference between a higher selling price and a lower purchase price with the result being a financial gain for the investor.

In the America, individuals and businesses are required to pay income tax on the total net capital gains the same as they do on other types of income. Capital gains are generally taxed at a preferential rate in comparison to ordinary income. This is to encourage investors to contribute to capital investments and to support new businesses. The tax amount is dependent upon the individual’s tax rate along with the period of time the investment was owned before being sold.   Long term gains are for assets owned for over a year.

Capital gains tax (CGT).

The profits you receive as a result of selling a capital asset will result in a tax for capital gains.

Gains of a long term type, the gain on assets you have ownership for more than a year for are taxed at a less rate than regular income but  short-term gains are still taxed at your standard rate.

The long-term capital gains tax rates are usually 15% for anyone whose l federal tax rate is 25% or higher and 5% for anyone whose tax rate is 10% or 15%. A few exceptions do exist. Such as long-term gains on collectibles will be taxed at 28%.

Gains on the sale of your primary home up to $250,000 are typically exempt from capital gains tax for those filing a single return and if you are filing a joint return this can be up to $500,000 as long as you meet the exemption requirements are met.