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

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

It’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.

Comments (13)

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.
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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.