Wednesday, August 15, 2018 9:23:20 AM
The stock market has been in overdrive for years, which means you could be making a bundle on your investments. But with the exception of savings in retirement accounts like 401(k)s and IRAs, the tax man will probably take a cut of your newfound wealth. It’s called capital gains, and how much tax you pay depends on how long you hold the investments, and how much you earn.
Long-term vs. short-term capital gains taxes
Long-term capital gains are those you earn on assets you’ve held for more than a year. Under the new 2018 tax law, such gains are taxed at three rates, depending on your overall income: zero, 15 percent and 20 percent. For example, a married couple filing jointly pays no capital gains tax if their total taxable income is $77,220 or less. They’ll pay 15 percent on capital gains if their income is $77,221 to $479,000. For couples above that income level, the rate is 20 percent. There also is a de facto fourth bracket for certain high earners who must pay an additional 3.8 percent on investment income as part of the Affordable Care Act.
By contrast, short-term capital gains are from assets you buy and sell within one year. They are taxed as regular income, which is always higher than the long-term capital gains rate. The government gives you a break on long-term gains to encourage buy-and-hold investments (as opposed to speculating), which stabilize the economy.
https://www.bankrate.com/investing/long-term-capital-gains-tax/
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