how much is capital gains tax

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If you earn money from the sale of a capital asset — your home, part of a business, stocks, or bonds, for example — that profit may be subject to capital gains tax.

There are two categories of capital gains: short term (assets held for a year or less) and long term (assets held for longer than one year). The day you acquire the asset isn’t included in your holding period, but the day you sell it is.

Any net gain resulting from the sale of an asset with a short-term holding period will be added to your gross income and taxed as ordinary income at rates between 10% and 37%. Net gains considered long term are usually taxed at 15% or 20% depending on your total taxable income.

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How much is capital gains tax?

The capital gains tax is generally favorable; you’ll never pay a higher tax than what you would pay on your ordinary income. The short-term capital gains tax rates are the same as your federal income tax bracket.

Long-term capital gains rates range from 0% to 20%, except in special circumstances. Capital gains resulting from the sale of collectibles held long term, like fine art or a coin collection, are taxed at the highest rates: 28%. Certain gains from real estate can be taxed at 25%.

Here are the federal long-term capital gains rates for 2020:

Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly

0%
$40,000 or less 
$53,600
$80,000 or less

15%
$40,001 – $441,450
$53,601 – $469,050
$80,001 – $496,600

20%
$441,451 or more
$469,051 or more
$496,601 or more

Here are the federal long-term capital gains rates for 2021:

Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly

0%
$40,400 or less 
$54,100
$80,800 or less

15%
$40,401 – $445,850
$54,101 – $473,750
$80,801 – $501,600

20%
$445,851 or more
$473,750 or more
$501,601 or more

Note: Taxable income is your income after all deductions are taken.

How do you calculate capital gains?

Every capital asset you own has a basis, which is generally the amount you paid for the property initially, plus any taxes or commissions. If you received the asset as a gift or from inheritance, there’s a special calculation for figuring out your adjusted tax basis.

To calculate the amount of gain (or loss), simply subtract the proceeds received on the date of the sale from your adjusted tax basis. If the proceeds are more than your basis, you’ll generate …read more

Source:: Business Insider

      

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How much is capital gains tax? It depends how long you held the asset and your income level

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