Question 1

What is the difference between long-term and short-term capital gains?

Accepted Answer

The difference is the holding period. Assets held for more than one year produce long-term capital gains, which are taxed at preferential rates of 0%, 15%, or 20%. Assets held for one year or less produce short-term capital gains, which are taxed as ordinary income at your regular marginal rate.

Question 2

What tax rate applies to long-term capital gains?

Accepted Answer

Long-term capital gains are taxed at 0%, 15%, or 20% depending on your total taxable income and filing status. Lower-income taxpayers may pay 0%, most middle-income taxpayers pay 15%, and high-income taxpayers pay 20%.

Question 3

What is the Net Investment Income Tax (NIIT)?

Accepted Answer

The NIIT is a 3.8% tax on net investment income (such as capital gains, interest, and dividends) for taxpayers whose income exceeds a threshold: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately.

Question 4

How are short-term capital gains taxed?

Accepted Answer

Short-term capital gains are added to your ordinary income and taxed at your regular marginal income tax rate. This is generally higher than the preferential long-term capital gains rates.

Capital Gains Tax Calculator

Capital Gains Tax Calculator

Your Capital Gains Tax

How Capital Gains Tax Works

1. Holding Period

2. Preferential Rates

3. Ordinary Rates

4. NIIT