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What you need to know about capital gains tax rates


Investing is all about making your money work for you – getting money without actually doing the work. But what some early investors may overlook is the fact that investment return means investment income, and investment income means taxes on investment income.

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One Financial Advisor can help you with tax planning to maximize your investments. Break down the tax rate on your capital gains in 2022 and 2021.

What is capital gain?

Capital gain refers to the amount an investor earns as a profit from the sale of one or more of their investments or properties. Making a profit means the investor now has income, of course, so this should be factored in when filing taxes. Once an investor realizes a capital gain, any proceeds will be treated as taxable income.

Capital gains vary depending on how long an investor has owned the property before selling it. Long-term capital gains come from assets held for more than a year. Short-term capital gains come from assets held for less than one year.

Based on filing status and taxable income, long-term capital gains for tax years 2021 and 2022 will be taxed at 0%, 15%, and 20%. Short-term income is taxed like ordinary income.

Capital income tax rate for 2022

The long-term capital income tax rate in 2022 is as follows:

Long-term capital gains tax rate for 2022

Ratio Only Married filing jointly Married Submit a separate application Head of a household 0% $0 – $41,675 $0 – $83,350 $0 – $41,675 $0 – $55,800 15% $41,675 – $459,750 $83,350 – $517,200 $41,675 – $258,600 $55,800 – $488,500 20% $459,750 + $517,200 + $258,600 + $488,500 +

In 2022, the capital income tax rate on short-term capital gains depends on income tax bracketIt is also a factor affecting application status.

For 2022, short-term capital gains tax rates are as follows:

Short-term capital gains tax rate for 2022

Ratio Only Married filing jointly Married Submit a separate application Head of a household ten% $0 – $10,275 $0 – $20,550 $0 – $10,275 $0 – $14,650 twelfth% $10,275 – $41,775 20,550 – 83,550 USD 10,275 – 41,775 USD 14,650 – 55,900 22% $41,775 – $89,075 $83,550 – $178,150 $41,775 – $89,075 $55,900 – $89,050 24% USD 89,075 – USD 170,050 USD 178,150 – USD 340,100 USD 89,075 – USD 170,050 USD 89,050 – USD 170,050 32% 170,050 USD – 215,950 USD 340,100 – 431,900 USD 170,050 – 215,950 USD 170,050 – 215,950 USD 35% $215,950– $539,900 $431,900 – $647,850 $215,950– $539,900 $215,950– $539,900 37% $539,900 + $647,850 + $539,900 + $539,900 + Capital income tax rate for 2021

The long-term capital income tax rate in 2021 is as follows:

Long-term capital gains tax rate for 2021

Ratio Only Married filing jointly Married Submit a separate application Head of a household 0% $0 – $40,400 $0 – $80,800 $0 – $40,400 $0 – $54,100 15% $40,401 – $445,850 $80,801 – $501,600 40,401 – $250,800 54,101 – $473,750 20% $445,850 + $501,600 + $250,800 + $473,750 +

In 2021, the capital gains tax rate on short-term capital gains also depends on the income tax bracket, which affects filing status.

For 2021, short-term capital gains tax rates are as follows:

Short-term capital gains tax rate for 2021

Ratio Only Married filing jointly Married Submit a separate application Head of a household ten% $0 – $9,950 $0 – $19,900 $0 – $9,950 $0 – $14,200 twelfth% $9,951 – $40,525 $19,901 – $80,050 $9,951 – $40,525 $14,201 – $54,200 22% $40,526 – $86,375 $81,051 – $172,750 $40,526 – $86,375 $54,201 – $86,350 24% $86,376 – $164,925 172,751 – $329,850 86,376 – $164,925 86,351 – $164,900 32% $164,926 – $209,425 $329,851 – $418,850 $164,926 – $209,425 $164,901 – $209,400 35% $209,426 – $523,600 $418,851 – $628,300 209,426 – $314,150 209,401 – $523,600 37% 523,601 USD + 628,301 USD + 314,151 USD + 523,601 USD + How is Capital Income Calculated and Reported?

To calculate capital return, you will need communicationor the price of the property when you pay for it.

However, profitability is not a guaranteed possibility. Investors may have to bear losses, meaning the underlying amount is more than the amount they ultimately sold the asset for. Capital losses can be used to offset capital gains due to taxes, but they must first offset capital gains of the same type.

Taxpayers making sales during the tax year will be required to report their profit and/or loss to the IRS on Form 1040, Schedule D, “Capital gains and losses.” They must first list all semiconductor transactions that resulted in this gain or loss on Form 8949, “Sales and other capital asset rights.”

Conclusion

Capital gains can be complicated, especially if you wait too long to understand how they relate to your financial situation at tax time. But knowing how long you’ll hold the property before you sell it, the purchase and sale prices, and your tax filing status and income bracket can help you work out how much tax you may owe.

Advice for investors

  • Need help with finding a financial advisor? Finding a qualified financial advisor is not difficult. SmartAsset’s free tool Match you with up to three financial advisors in your area, and you can interview your mentors for free to decide which is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start right now.

  • You may also be interested in subscribing robo advisor. Many robo-advisors offer tax-loss services, sell investments that are hurting your portfolio, and help offset what you’ve made from profits. Robot advisors aren’t necessarily right for everyone, but if you’re starting your investment journey or you don’t have complicated assets, you might want to give it a try. If you’re unsure, find a place that offers you the opportunity to speak with a financial professional if you have questions about your specific needs. Not all robo-advisors offer this privilege, but some do, usually for a fee.

Image source: © iStock.com / Korrawin, © iStock.com / Tempura, © iStock.com / Jirapong Manustrong, © iStock.com / Geber86

Post 2022 and 2021 Capital income tax rate appeared first on SmartAsset Blog.

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