A long-term gain, however, can be taxed at 15%, 20% or not taxed at all depending on your regular income tax bracket. When a gain is short-term, it is taxed at the exact same rate as your ordinary income. That means higher earners generally pay a higher capital gains tax rate. How income affects capital gains taxesĬapital gains tax rates, like income tax rates, are progressive. 11, 2018 - 366 days since your purchase, since the day you dispose of the property is part of your holding period - it will net you the lower long-term capital gains tax rate. 10, 2017, and sell on the 10th day of the following January, your one-year ownership of the stock would mean your profit would be taxed at the higher short-term rate. The case that could breach the wall between church and stateįor example, if you bought stock on Jan. To reach that mark, begin counting on the date after the day you acquired the asset. The holding period for a long-term capital gain is at least one year and a day. To ensure your gain is the long-term type, pay close attention to the calendar when selling your assets. (Not sure about your tax rate? Review this rundown on federal tax brackets.) Short-term gains, on the other hand, are taxed at your ordinary tax rate. The tax rate on a long-term gain is lower than what you pay on your ordinary income, such as wages. In this case, tax law rewards patient investors. A long-term capital gain comes from a profitable sale of an asset that you’ve held for more than one year. When you make a profit on the sale of an asset you’ve held for one year or less, that’s defined as a short-term gain.
The tax code divides capital gains into two types: long-term and short-term. The exact capital gains tax rate you’ll pay depends primarily on two things: how long you hold the asset before selling, and your income. In some cases, you might not owe any taxes on your capital gains. In most cases, however, the tax rate on capital gains is lower than the rate on your regular income. It’s generally considered taxable income. When you turn a profit on the sale of assets, such as stocks, bonds, mutual funds or real estate, it’s called a capital gain.