Capital Gains Tax Rate

The capital gains tax rate is based on how long you have held onto the investment and on the type of investment asset that is being taxed.

The tax rates that apply to net capital gain are usually lower than the tax rates that apply to other income. Capital gains tax rates are not a simple flat tax rate. There are factors that need to be considered to determine the capital gains tax rate for your personal situation in life.

TurboTax Online will calculate your tax rate for capital gains. TurboTax will also ensure you include the correct attachments and schedules according to IRS procedures for your income tax return form.

Capital gains are taxed as a short term or long term capital gain. A short term capital gain has a holding period of one year or less and is taxed at ordinary income tax rates usually ranging from 10% to 35%. A long term capital gain has a holding period of longer than one year. Long term capital gains are taxed at lower rates than short term capital gains. Your marginal tax bracket will determine if your long term capital gain will be taxed at 0% to 15%.

Capital Gains Tax Rate Holding Period

The holding period for a capital gain begins the day after you purchased your investment until the date you sold your investment. IRS Publication 550 explains the rules and regulations about investment income and expenses.

Types of Capital Gains

Not only is the capital gains tax rate determined by the holding period, the tax rate is also determined by the type of capital asset being taxed.

Types of Capital Assets:

• Collectibles
• Real Estate
• Business Assets
• Small Business Stock
• Stocks
• Mutual Funds
• Bonds
• Precious Metals
• Coins
• Fine Art

Capital gains are taxed according to the holding period, and the type of capital asset being taxed by the federal government. Capital gains are also subject to taxation by the state. Most states do not have a certain set of separate capital gains tax rates. Typically, most states will tax your capital gains just like ordinary income which is subject to the state income tax rates for that particular state.

Calculating your capital gains tax rate can be complicated. You may ask, “how much is the capital gains tax rate?” Well now you know there is not a simple answer for the tax rate concerning a capital gain.

Use TurboTax Online to report your capital gains for federal and state taxes, and you will have confidence knowing your income tax return is prepared and filed correctly.