Current Capital Gains Tax Rate - How To Determine It ?
December 4, 2004
By Srinidhi Goenka
A capital gain is the profit that you make by selling
an investment or an asset and a capital loss is the
loss incurred by you as a result of the sale of an
investment or an asset. You have to calculate the
net capital gains made by you and pay tax on it. Every
year, the capital gains tax rate changes. The current
capital gains tax rate for each year is determined
by the rate of inflation, economic factors, goals
of the economy etc.
Some of the items which are taxed as capital gains include the
gains made by the sale of stock, mutual funds, real estate, redeemed
any retirement bonds, estates, trusts, undistributed capital gains
etc. You then have to calculate the capital gains tax based on the
current rate for each individual sale. This will help you to determine
your total capital gain or loss for the entire year.
What Are The Capital Gains Tax Rates Which Prevail Today ?
There is no single capital gains tax rate. There are a series of
rates which are applied to each individual based on certain criterion.
These rates are: 8%, 10%, 20%, 25%, and 28%. Different rates apply
to different gains.
The tax rates which apply to the gains are based on the following
criteria :
o the income level of the individual i.e. his/her tax bracket
o the time period for which the asset was owned by the individual
o the type of the asset - investment, collectible or real estate.
In order to avoid the capital gains tax, the longer you own your
asset before you sell it, the lower the tax you will have to pay.
But always remember to see your ultimate profit. With the aim of
just avoiding taxes on the gain, it should not happen that you incur
a loss and end up paying no tax !
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