Capital Gains Tax: When Is It Due and How Much Is It?

When Is Capital Gains Tax Due?

Capital gains tax is due when you sell or dispose of a capital asset, such as a stock, bond, or real estate. The tax is calculated on the difference between the sale price and your cost basis in the asset.

For most assets, you must report capital gains on your tax return for the year in which the asset was sold or disposed of. However, there are some exceptions to this rule. For example, if you sell a personal residence, you may be able to exclude up to $250,000 ($500,000 if you are married filing jointly) of your capital gains from taxation.

How Much Is Capital Gains Tax?

The amount of capital gains tax you owe depends on your taxable income and the type of asset you sold. There are two main types of capital gains tax rates: short-term and long-term.

Short-term capital gains are taxed at your ordinary income tax rate. This means that if you sell an asset that you have held for less than one year, the capital gains will be added to your other income and taxed at your marginal tax rate. Short-term capital gains tax rates range from 10% to 37%.

Long-term capital gains are taxed at a lower rate than short-term capital gains. This means that if you sell an asset that you have held for more than one year, the capital gains will be taxed at a rate of 0%, 15%, or 20%, depending on your taxable income. Long-term capital gains tax rates are as follows:

• 0% for taxpayers with taxable income below $40,000 ($80,000 if married filing jointly)
• 15% for taxpayers with taxable income between $40,000 and $441,500 ($80,000 and $501,900 if married filing jointly)
• 20% for taxpayers with taxable income above $441,500 ($501,900 if married filing jointly)

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