What Is Capital Gains Tax? - Definition And History

Want To Sell Something? Don't Forget The CGT!

July 29, 2004
Bogdan Voicu

You probably heard it over and over. 'Keep the capital gains tax on a lower level!'.'I think I will wait another year to lower the capital gains tax'. What Is Capital Gains Tax?

The Capital Gain Tax is, first of all, well, a tax. It is an obvious answer to the question: "What Are Capital Gains Taxes?". To be more specific, is an income tax. Every income that comes to you because of a increase in capital (from selling something, like a house or a painting a.s.o.) is subject to this tax.

Who pays the capital gains tax? Both individual and companies have to pay this tax calculated on the net total of all their capital gains. The advantage of this tax is that if you are selling has been held for over one year, the tax rate on its selling will be lower.

Further, not everyone pays the same tax. There are 6 income tax brackets with different revenue levels and different rates. Every individual or company falls under the jurisdiction of one of these brackets; hence, they can calculate their capital gains tax using these.

Capital gains tax appeared in the United States in 1913, since the enactment of the federal income tax. A surprise is that, if you listen to the controversial debates surrounding it, you would think it is a big percentage of the federal revenue. It is not. Actually, it is no more then 5% of the total federal tax receipts. Yet, it is so long discussed because it is the most visible one to a larger number of people. Everyone sold something in their lives so, everyone had to pay it.

These are the general lines of the capital gains tax. You can find all rates, a calculator and more just browsing through our website.