Capital Gains Tax Percentage – How Much?

So How Much Will It Cost Me?

August 19, 2004
By Niles Brohey

Capital gains taxes are levied against profits resulting from the sale or exchange of certain assets. The rate of capital gains tax charged is dependent on on a a handful of factors which will be crucial in working out your capital gains tax percentages.

The three crucial factors setting your capital gains tax rate are – the rate of income tax you pay, for how long you have owned the asset in which you are selling or exchanging, and finally what kind of asset (investment, collectible or real estate) you are trading.

If you have owned a capital asset for less than one year it is considered a short term asset. Such assets are liable for capital gains tax at the same rate as your income is taxed. If however you have owned the asset you are trading for a year or more is it considered a long term asset. This means it will be charged at your capital gains tax base rate, this rate varies according to your income. If you pay more than 15% income tax your capital gains tax will be 15%, if you pay less than 15% income tax then your capital gains tax rate will be 5%. These rates dropped by 5% in 2003.

There are certain special capital assets which are not charged in the way outlined above. These special assets are taxed at a flat rate which is not dependent on any other index and is not variable. The two assets which are specially taxed are real estate (which is taxed at 25%) and collectibles (which are taxed at 28%). Another key factor in capital gains tax rates and percentages is your location. Rates and rules vary throughout the United States and this must be taken into account.

For some time now the general trend in long term capital gains tax rates has been for them to decline. Capital gains tax reform is high on many politicians agendas and so we are likely to see this trend continuing for the foreseeable future.