![]() In practice, however, the opposite is true. The tax treatment of capital income, such as from capital gains, is often viewed as tax-advantaged. 2020 Long Term Capital Gains Tax Rates Source: “2020 Tax Brackets,” Tax Foundation and IRS Topic Number 559įor Married Individuals Filing Joint Returns Table 1 indicates the tax rates applicable to long-term capital gains for tax year 2019. ![]() If an asset was held for more than one year and then sold for a profit, it is classified as a long-term capital gain. If an asset was held for less than one year and then sold for a profit, it is classified as a short-term capital gain and taxed as ordinary income. Capital gains tax rates vary depending on two factors: how long the asset was held and the amount of income the taxpayer earns. ![]() In the United States, when a person realizes a capital gain, they face a tax on that gain. homeowners benefit from a generous exemption for gains resulting from the sale of their primary residence, set at $250,000 for single filers ($500,000 for joint filers). Although capital gains taxes typically apply to the returns from any capital asset, including housing, U.S. When the asset is sold at a price higher than its basis, it results in a capital gain when the asset is sold for less than its basis, it results in a capital loss. The purchase price of a capital asset is typically referred to as the asset’s basis. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment.Ĭapital assets generally include everything owned and used for personal purposes, pleasure, or investment, including stocks, bonds, homes, cars, jewelry, and art. A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation.
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