![]() ![]() As the tables above show, many taxpayers are eligible to have their long-term capital gains taxed at 0% or 15%. The advantage of long-term capital gains tax treatment is that it can result in a much lower overall bill. "To determine how long you held the asset, you generally count from the day after the day you acquired the asset up to and including the day you disposed of the asset." Long-Term Capital Gains Advantages What constitutes a year exactly? As per the IRS code, this is how a taxpayer should count the time an asset was held: There are no marginal changes aside from that threshold. If the duration is 364 days or less, it's a short-term capital gain and falls into the same camp as ordinary income. If an asset is held for a year or more, it's long-term and receives the preferential tax rates shown above. Short-Term Capital GainsĪs things are structured now, the difference between short-term capital gains and long-term gains is very simple. Tip: Since tax brackets are indexed to inflation, during periods of high inflation, pay special attention to these thresholds when making decisions about in which year to realize capital gains on a position. Here are the applicable tax rates for both years: 2022 Long-Term Capital Gains Tax Rate and Brackets Filing StatusĬlick to enlarge 2021 Long-Term Capital Gains Tax Rate and Brackets Filing Status ![]() With inflation picking up, the 2022 tax brackets have moved up a few percent from the 2021 levels. Rather, they are adjusted each year to reflect inflation. The tax brackets are not permanently fixed at one income threshold. ![]() Not quite everything is a capital asset, however, and we'll discuss some corner cases below. This includes real estate, furnishings, and other durable goods. According to the IRS's Topic 409, almost anything a taxpayer owns for investment or personal use applies. However, the term encompasses much more than that. Investors generally think of capital assets as standard financial instruments such as stocks and bonds. When an individual taxpayer sells a capital asset, they are assessed tax on the profit between the cash received on that sale and the price paid. Courtneyk/E+ via Getty Images What Is Long-Term Capital Gains Tax? ![]()
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