{"id":37132,"date":"2022-10-31T00:00:00","date_gmt":"2022-10-31T00:00:00","guid":{"rendered":"https:\/\/kiiky.com\/wealth\/?p=37132"},"modified":"2022-10-31T13:00:52","modified_gmt":"2022-10-31T13:00:52","slug":"long-term-capital-gains-tax","status":"publish","type":"post","link":"https:\/\/kiiky.com\/wealth\/long-term-capital-gains-tax\/","title":{"rendered":"What is the Long-term Capital Gains Tax?","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n
If you are on this page reading about long-term capital gains tax, it means the stock you bought has appreciated well enough. The revenue you make when you sell stocks is subject to capital gains tax, which is a specific tax imposed on the sale of an item that has increased in value; long-term capital gains tax.<\/p>\n\n\n\n
A capital loss, however, occurs when an asset is sold for less money than it was originally purchased for and if you sell an asset for a profit, depending on how long you’ve had it, you may be subject to a short- or long-term capital gains tax.<\/p>\n\n\n\n
When you sell the stock, you will have a realized gain on which you must pay as a long or short-term capital gains tax.<\/p>\n\n\n\n
A tax on assets kept for more than a year is known as a long-term capital gains tax. Long-term capital gains tax rates range from 0% to 15% to 20%, depending on your level of income. Typically, these rates are significantly lower than the regular income tax rate.<\/p>\n\n\n\n
While capital gain taxes are inconvenient, some of the best assets, such as stocks, allow you to avoid saying them if you don’t sell the position before realizing the gains. As a result, you may hold your investments for decades and pay no taxes on the profits.<\/p>\n\n\n\n
To know how capital gains tax works, we’ll look at the following instance. If you buy $5,000 in stock in May and sell it for $5,000 in December of the same year, you would have gained a $500 short-term capital gain. <\/p>\n\n\n\n
Then, you must pay the IRS $110 of your $500 capital gains if you are in the 22 recent tax rate. That leaves you with a $390 profit.<\/p>\n\n\n\n
But, if you hold on to the stock until December of the following year and then sell it, you will have made a long-term capital gain of $700. S, if your total income is $5,000, you’ll be taxed on that long-term capital gain at a rate of 15%. Rather than sending $110, you’ll pay $105 resulting in a net profit of $595.<\/p>\n\n\n\n
The tax treatment of long-term capital gains altered after the passing of the Tax Cuts and Jobs Act (TCJA). Prior to 2018, the tax brackets for long-term capital gains and income tax brackets were nearly identical. Long-term capital gains tax brackets were created under the TCJA. These figures, however, fluctuate from year to year.<\/p>\n\n\n\n