Capital gains are subject to different tax rates from "summary" of Income Tax Fundamentals 2021 by Gerald E. Whittenburg,Martha Altus-Buller,Steven Gill
Capital gains are subject to different tax rates depending on how long the taxpayer holds the investment before selling it. Short-term capital gains are those from the sale of assets held for one year or less. Short-term capital gains are taxed at the same rates as ordinary income, which can be as high as 37% for individuals in the highest tax bracket. On the other hand, long-term capital gains are from assets held for more than one year. Long-term capital gains are subject to preferential tax rates that are generally lower than those for ordinary income and short-term capital gains. For most taxpayers, the long-term capital gains tax rates are 0%, 15%, or 20%. The specific long-term capital gains tax rate that applies depends on the taxpayer's filing status and taxable income. Taxpayers with lower incomes may qualify for the 0% long-term capital gains tax rate, while those with higher incomes may be subject to the 15% or 20% rate. In some cases, higher-income taxpayers may also be subject to an additional 3.8% Net Investment Income Tax on their capital gains.- As this can have a significant impact on their overall tax liability. By understanding the tax implications of buying and selling investments, taxpayers can make informed decisions that help them minimize their tax burden and maximize their after-tax returns.
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