What Is The Federal Capital Gains Tax Rate

How the 0 rate works.

In 1988 1989 and 2000 the top tax rate on capital gains was the same as the top tax rate on ordinary income. Short term capital gains are treated as ordinary income on assets. The 0 tax rate on capital gains applies to married taxpayers who file joint returns with taxable incomes up to 80 000 and to single tax filers with taxable incomes up to 40 000 as of 2020. In 2020 the capital gains tax rates are either 0 15 or 20 for most assets held for more than a year.

Stock funds are taxed at the capital gains tax rate. You ll owe either 0 15 or 20 on gains from the sale of most assets or investments held for more than one year depending on your annual taxable income for more on how to calculate your long. As the tables below for the 2019 and 2020 tax years show your overall taxable income determines which of. Throughout the history of the income tax capital gains generally have been taxed at lower rates than ordinary income.

Here are the 2019 capital gains tax rates. Short term capital gains rates tax rates for short term gains are 10 12 22 24 32 35 and 37. Rates rise as income rises. Tax system is progressive with rates ranging from 10 to 37 of a filer s yearly income.

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State and local taxes often apply to capital gains. Capital gains tax rates on most assets held for less than a year correspond to ordinary. Long term capital gains are usually subject to one of three tax rates. Bond funds are taxed differently and some are even tax exempt such as those that invest in municipal bonds.

Since 2003 qualified dividends have also been taxed at the same lower rates as capital gains. For single folks you can benefit from the zero percent capital gains rate if. Short term gains are for assets held for one year or less this includes short term stock holdings and short term collectibles. There can be years when you ll have less taxable income than in others.

Therefore the top federal tax rate on long term capital gains is 23 8. 0 15 or 20.