Capital Gains Tax in the United States
The United States imposes a tax on profits from the sale of capital assets, known as capital gains tax. The rate of this tax depends on the type of asset and the taxpayer’s income level.
Capital Gains Tax Rates
The capital gains tax rate in the US can be 0%, 15%, or 20%. The rate depends on the type of asset and the individual’s income level.
Holding Period
The capital gains tax rate is determined based on the holding period of the asset. Assets held for longer than a year are subject to the long-term capital gains tax rates, while assets held for a year or less are subject to ordinary income tax rates.
Long-Term Capital Gains Tax Rates for 2024
The long-term capital gains tax rates for 2024 vary based on filing status. For single filers, the rates are 0% for up to $47,025, 15% for $47,025 to $518,000, and 20% for amounts over $518,000.
Special Capital Gains Rates and Exceptions
Some categories of assets have different capital gains tax treatment. For example, gains on collectibles are taxed at a flat rate of 28% regardless of income. Additionally, there are specific rules for capital gains on owner-occupied real estate and investment real estate.
Sources
- Capital Gains Tax: Meaning, Rates and Calculator – NerdWallet
- Capital Gains Tax: What It Is, How It Works, and Current Rates – Investopedia
- Topic no. 409, Capital gains and losses | Internal Revenue Service
FAQs
Does the US have capital gains tax?
Yes, the US imposes a tax on profits from the sale of capital assets, known as capital gains tax.
What is the capital gains tax rate?
The capital gains tax rate depends on the type of asset and the individual’s income level. The rates can be 0%, 15%, or 20%.
How long do I have to hold an asset to qualify for the long-term capital gains tax rate?
You must hold an asset for longer than a year to qualify for the long-term capital gains tax rate.
Are there any exceptions to the capital gains tax?
Yes, there are some exceptions to the capital gains tax. For example, gains on owner-occupied real estate and investment real estate may be eligible for special tax treatment.
How do I calculate my capital gains tax?
To calculate your capital gains tax, you need to determine your capital gain or loss. This is done by subtracting the cost or other basis of the asset from the amount you sold it for. Once you have your capital gain or loss, you can use the capital gains tax rates to calculate the amount of tax you owe.
When do I have to pay capital gains tax?
You must pay capital gains tax on the year in which you realize the gain. This is typically the year in which you sell the asset.
Can I avoid paying capital gains tax?
There are some ways to avoid paying capital gains tax, such as holding assets for longer than a year, using tax-advantaged retirement accounts, and taking advantage of certain tax deductions and credits.