What will capital gains tax rate be

Typical assets include businesses, land, cars, boats, and investment securities such as stocks and bonds. Selling one of these assets can trigger a taxable event. This often requires that the capital gain or loss on that asset be reported to the IRS on your income taxes. Generally, capital gains and losses are handled according to how long you've held a particular asset — known as the holding period.

Typically, there are specific rules and different tax rates applied to short-term and long-term capital gains. In general, you will pay less in taxes on long-term capital gains than you will on short-term capital gains. Likewise, capital losses are also typically categorized as short term or long term using the same criteria. You typically do not benefit from any special tax rate on short-term capital gains. Instead, these profits are usually taxed at the same rate as your ordinary income.

This tax rate is based on your income and filing status. Other items to note about short-term capital gains:. If you hold your assets for longer than a year, you can often benefit from a reduced tax rate on your profits. One major exception to a reduced long-term capital gains rate applies to collectible assets, such as antiques, fine art, coins, or even valuable vintages of wine.

Typically, this surtax applies to those with high incomes who also have a significant amount of capital gains from investment, interest, and dividend income.

One of the many benefits of IRAs and other retirement accounts is that you can defer paying taxes on capital gains. The negative side is that all contributions and earnings you withdraw from a taxable IRA or other taxable retirement accounts, even profits from long-term capital gains, are typically taxed as ordinary income. So, while retirement accounts offer tax deferral, they do not benefit from lower long-term capital gains rates.

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Capital Gains and State Taxes. Special Rates and Exceptions. Advantages of Long-Term Gains. The Bottom Line. Key Takeaways Capital assets include stocks, bonds, precious metals, jewelry, and real estate.

When you sell a capital asset for more than the original purchase price results in a capital gain. Selling a capital asset after owning it for less than a year results in a short-term capital gain, which is taxed as ordinary income. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

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