Capital Gains Rates For Long Term/Short Term 2010, 2011, 2012, 2013+

June 16th, 2011 by Filed under: Filing Taxes, Tax Tips

capital gains tax rateIt’s important for all taxpayers to understand what information must be reported to the IRS for tax purposes. This includes any gain or loss from the sale of capital assets. A capital asset is considered anything owned by an individual for investment or personal purposes.

As a general rule, capital assets include property and investments which are not easily liquidated for cash. Real estate, equipment and other assets which contribute to business operations or personal use are considered capital assets; the sale of which must be reported on income tax returns.

What is a Capital Gain?

Capital assets include almost anything owned for the purpose of investment, pleasure or personal use. When a capital asset is sold, a capital gain or loss occurs. If the amount a capital asset is sold is higher than the original purchase price, the difference is a capital gain, or profit. Conversely, when the amount a capital asset is sold is less than the original purchase price, the difference is considered a loss.

How to Report Capital Gains

Capital gains must be reported on your federal income tax return. Capital gains are subject to tax, the rate of which is determined by the length of time the asset was held. To report capital gains on your income tax return, use Schedule D, Capital Gains and Losses. Transfer information from the Schedule D to Form 1040, Line 13. Capital losses from investment property may be deducted.

Capital Gains Classifications

Capital gains are classified by the amount of time you held the asset. Capital gains from assets held more than one year are classified as long-term. Capital gains from property held one year or less are classified as short-term. Long- and short-term classification of capital gains are important as it impacts rate at which they are taxed.

Short-Term Capital Gains Tax Rates

Federal capital gains tax rates for short-term capital gains are usually the same rate applied to ordinary income reported the same year. This can range anywhere from 10% up to 39.6%.

Long-Term Capital Gains Tax Rates

Federal capital gains tax rates for long-term capital gains are usually lower than tax rates applied to ordinary income reported the same year. The special long-term capital gains rate is determined by the ordinary income tax bracket under which you fall. Tax rates for filers in the 10% or 15% tax brackets (including capital gain income) would be 0%. Income totals including capital gain income in the 25% or higher tax bracket will have gains taxed at 15%.

Capital Gains Rates for 2010, 2011, 2012 & 2013

Tax Years 2010-2012

Income Tax Rate
Short-Term Capital Gains Tax Rate
Long-Term Capital Gains Tax Rate
10%
10%
0%
15%
15%
0%
25%
25%
15%
28%
28%
15%
33%
33%
15%
35%
35%
15%

 

Tax Years 2013-

Income Tax Rate
Short-Term Capital Gains Tax Rate
Long-Term Capital Gains Tax Rate
10%  10% 0%
15%
15%
0%
25%
25%
15%
28%
28%
15%
33%
33%
15%
 35%  35%  15%*
 39.6%  39.6%  20%*

*There is also an additional 3.8% surtax on investment income if your adjusted gross income is more than 200k (individuals) and 250k (married filing jointly) with obamacare in 2013

Capital gains and losses are reported in the year the sale of the asset occurred. Capital losses may reduce taxable income up to $3,000 annually.  If capital losses exceed the allowable deductible amount for the year, they can be carried over to the next year.

  • Greg Savage

    Is there a chart that shows the current state capital gains rates?

  • Lucy Perry

    Hey Greg,How are you? I think you should be able to find your answer at your state’s web pages. Look for: Dept of Finance; Income Tax; Dept. or Revenue; etc. Hope this helps.

  • Fred

    When to report and pay taxes on 2012 long term capital gain

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  • http://www.retirecountry.com Jason Lee

    Thats good info. I heard long term capital gains tax on say 28% bracket jumps to 35% in 2013. So look like the obama admin looking for another 5% from pep in this bracket. What happen to just raising taxes on people making more then 250k? can’t believe pep put him in for a second term.

  • http://www.mathgamecool.com John Werner

    Like someone said, it could possibly be 35% depending on if congress does anything to extend the bush tax cuts. Can’t say this admin has helped us out ONCE. None of the Obama plans have helped and we do not make over 100k.

  • valpromike

    Why do people who get their income from buying and selling stock in existing corporations pay a lower tax rate than I do on my earned income? They aren’t putting money in new businesses, to addd jobs. Investors that invest in stock on the market in existing corporations are simply investing in future earnings of existing businesses.

    • Cito

      You are right about investors are investing in the future earnings of existing businesses but what you do not understand is the volatility of what the shares are to a business. The company operates hopefully on a basis it makes more than it uses. In some cases the corporation sells its own shares to the market to increase the Free Cash Flow to, to (hopefully) run a more efficient company by investing in more manual labour or fixed assets. People who invest from buying and selling stocks are RISKING their money in hopes of making more. By making an earned income, although nothing is wrong with it, it is safer for an individual. Our economy is driven by investing/spending. You can spend to stimulate the economy directly or you can invest to stimulate the economy in the long run. Saving does not do anything for the individual or the economy.

      PS. ANYONE can trade stocks, including this college student who has little capital to start off. You may want to look into investing, it’s definitely fun and a good way to make money for both you and the government (via taxation).

      • Johnny

        Cito. You are correct. One mistake you make is how savings does nothing for the economy. You are wrong here. Savings is where investment comes from. Without savings, there is no investment. Savings is often the result of self-sacrifice. It is investment that improves the overall standard of living for a country. If all we had to do was spend, then every socialist country in the world would be prosperous. However, it is not spending that improves the standard of living first, it is investment which comes from savings. This is contrary to the general belief taught in many schools that demand creates supply. It doesn’t. Keynes was wrong. Supply creates demand. If you take money out of the equation, it becomes easier to see. If you are a baker, and I am a candle stick maker, in order for me to obtain bread I have to produce candles.

        • acnoles

          But in order for the baker to make him bread, the candle maker must want it thus creating the demand first. Right? Restaurant buffets go out of business all the time because they are constantly putting out food. If the amount of diners decreases, then this excess supply goes to waste, food costs go up, and the business closes.

    • johnny

      In most cases they don’t. Warren Buffet doesn’t pay less than his secretary. He may only pay 15% on capital gains on the personal level but since he owns 1/3 of BH, he is paying the corporate tax as well. If the corporate tax wasn’t there, the value of his company and EPS would be much higher. So really he is not paying less than his secretary.

      • m bc

        Average EFFECTIVE corporate tax rate in US is in single digits…
        .
        So Warren still pays less than his secretary.
        .
        Work is penalized with higher taxes… and with only those making under $118,500 and their employers paying full Social Security tax rate of 12.4%.
        /
        That depresses wages and take home pay by 12.4% off the top of every worker’s salary/wage.
        /
        If ALL income from EVERY source..paid the tax… we could lower the rate to under 6% and collect the same amount.
        .
        Immediate “raise” of over 6% of gross salary …. Which is $3,000 for each American who makes 50K a year.,
        ,
        Imagine what that would mean for millions of families….

    • tax guy

      There are many reasons that capital gain rates are lower. One is, that this money has already been taxed once when it was received as earned income. The second, is there is a big risk with investing. Unlike your job, if you know you earn $10 an hour and work for 10 hours, you expect to receive $100. With investing, there is no guarantee that your $100 will increase or go to zero. Also with earned income, you are taxed at current rates, so inflation does not directly affect your income. With capital gains, lets assume you invest $1000 and there is 10% inflation. If you sell 1 year later and your account is worth $1100, in real income terms, you have broken even, but according to the government you made(10%) or $100, and have to pay tax on that gain. So in real terms you have lost buying power. To address your exact question, AMT has a lot to do with. If someone gets paid in stock, they often are paid based on options. If an executive has an option to buy a stock at $10 a share and its value is $100, that individual must make an AMT adjustment of $90 per share immediatly, meaning there is a large chance that they will be paying AMT on some of that income. If they sell the stock immediatly, they will avoid tme AMT, but teh cpaital gains will not be short term and taxed at Ordinary Income rates instead. During the internet boom in the late 90’s, a lot of executives took options like this and after the companies bottomed out a lot of them were left with large tax bills due to AMT, causing them to go bankrupt and lose their house, car, everything. In short, there is risks with capital gains and the lower rate accounts for this risk.

      • m bc

        The problem is that government policies artificially inflate corporate profits… and thus stock gains…. and then allow discounted income tax rate for wealthy investors.
        .
        Also, that we do not apply Social Security or Medicare taxes to such income. Which treats work as less valuable than investment…. Entirely contrary to rewarding work.
        .
        Which means working Americans pay a much higher overall tax rate (up to 39,6% + 15.3%), while wealthy investors pay only 20%, which was 15% due to Bush tax cuts until 2013.
        .
        As for double taxation…. That is largely a red herring….
        .
        First off it only potentially applies as to dividends..
        .
        Corporate taxes have essentially NOTHING to do with bond or stock market gains, as the investment is entirely outside of the company.
        .
        Not to mention that MOST companies pay little or no corporate taxes… due using offshore accounts and subsidiaries to which profits are shifted on paper….AND also because Congress has given them a myriad of tax credits, deductions, and other taxpayer funded subsidies.
        .
        Note that Exxon, GE, Boeing, etc…. made billions each of the past few years… and paid very little corporate income tax , GE even got a Billion dollar tax rebate while making several billion in profits.
        .
        The AMT and stock option issue is not a problem with basic planning… making an 83B election… risk of losing options due to vesting delays taxation, as do many other techniques.
        .
        I am far less worried that executives and wealthy Americans will have an issue with options valued highly enough to generate six or seven figure tax bills…
        .
        Than I am with working Americans having a fair tax burden…. with lower taxes for working poor and middle class, and the wealthy paying a fair (or any) share of taxes, including for Security and Medicare.

        Work should be rewarded by the tax code… and today we have ONLY lower and middle class workers paying 15.3% to fund SS & Medicare…plus higher income tax rates…
        .
        While wealthy investors pay a reduced 20% (taxpayer subsidized) capital gains rate… and ZERO….NOTHING.. for Social Security/Medicare taxes.
        .
        That is wrong… no matter how you slice it.

    • m bc

      Because Republicans constantly favor the wealthy, who they somehow think are better or more deserving…
      .
      And because they simply don’t get that… In America… the government is supposed to be “of and for the people.”
      .
      Claim is that lower capital gains rates encourage the wealthy to invest… Which is kind of self-serving…
      .
      Between 85% and 90% of all stock market and commercial real estate gains went to those with ANNUAL INCOME OVER $500,000 and NET WORTH OVER 2.5 Million dollars.
      .
      Really..????….As if these wealthy Americans would put their money in a coffee cup or savings account…. If taxpayers didn’t subsidize rich investors with discounted income tax rate of 20%.
      .
      Note that, with Bush tax cuts… the capital gains tax rate was only 15% until 2013.
      .
      This 20% subsidized rate…is nearly a 50% discount.. compared with (39.6%) top rate WORKING AMERICANS pay on salaries/wages.
      .
      AND…. Wealthy Investors pay ZERO… 0%… NOTHING… as Social Security or Medicare taxes on capital gains from stocks, real estate, rents, dividends, or any non-wage income….
      .
      So lower and middle class AMERICAN WORKERS….pay “normal” income taxes PLUS 15.3%..
      .
      While very highly paid executives get a pass on the SS tax for salaries over $118,500….
      .
      And VERY wealthy investors pay taxpayer subsidized half income tax rate… and NO SS OR MEDICARE TAXES at all.
      .
      NET RESULT…. TAX RATE FOR WEALTHY INVESTORS IS ABOUT HALF OF THE RATE PAID BY WORKING AMERICANS.
      .
      That is entirely wrong… and penalizes over 100 million working poor and middle class Americans… to subsidize the very rich.
      .
      EVERY YEAR… So the wealthy have more to reinvest… Rinse and repeat… year after year…. and its easy to see that the wealthy get wealthier… Not because they are smarter or work harder (or at all)… but because of TAXPAYER SUBSIDIES…
      .
      That is why I get disgusted at Republicans constant and dishonest labeling of poor and working poor Americans who receive unemployment or food stamps as “entitled” or “takers”.
      .
      When it is the wealthy… To whom Republicans provide taxpayer subsidies.. are actually the real “entitled” and “takers”.
      .
      Republicans rush to give billions of taxpayer dollars to huge corporate “farmers” (Monsanto, ADM, etc…)….In assured profits or subsidized insurance.

      But scream about food stamps that ensure poor Americans….. (75% children)…. have food to eat.
      .
      And yet, incredibly… about half of all Americans making under $50,000… vote Republican/Tea Party.

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  • GetReal

    All of these rates remain very low based on historical rates. With the current debt problem the US is carrying, we need both across the board increases to cap. gains, along with massive government spending cuts.

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  • Moo

    40% tax rate???? That’s absurd!

  • Suzie

    My 85 year old mother-in -law recently sold a vacant house that has been sitting vacant for 7+ years. She owns another home that is her primary residence. She bought the house in @ 1944 for $6500 and sold the home for $155,000. She has of course remodeled a couple of times with additions and has recentlypent @ 20K on updates for selling the home. We are putting together a log for the updates, but the amount of time may make this a difficult job. She has not filed taxes in the past 10 years because her income was so low. What are the tax implications to her after this sale?

  • Amanda

    Question, What if you received an equity advance from your employer as part of a relocation? We received advance in Dec. but sold our home in Jan 2014. On our W-2 the equity advance is show as income. Not sure on how to manuver through this?

  • Mike

    My mother has had a property since 1977 and bought the house for about 77,000. She sold the house this year for about 225,000.00. She gave all the money for this divided equally to her children. Do you know how to go about putting this on the schedule D and 8849 form?

  • Michele

    I sold a car in 2013 made $24000 I know there is no capital gain but do I owe regular income tax on this. I’m in the 15% tax bracket.

  • kong

    Great Article. Thanks for the info. Does anyone know where I can find a blank “2012 IRS 1040 – Schedule D” to fill out?

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