Long term capital gains tax

[Misspag]

Hi,

If I sold stocks that I have had for over one year and earned $25,000 return, what will my capital gains tax rate be? Is there a way to avoid the taxes and invest the money into something else or move it into another tax deferred account?

Thanks,

Misspag

[EleanoreS]

Long term capital gains rates depend on your filing status and your total taxable income.  This is a great TurboTax article that gives a lot of great information and has charts for you to look up the rate that would apply to you based on your filing status and taxable income.

The article also suggest a few ways you can minimize the tax you pay on capital gains.  Another possibility would be if you had other stocks that generated a loss; that loss would offset the gain.

Congratulations on your profitable capital transaction!  Thank you for joining us at the Ask the Expert event today

[Andrew_W]

Assets held for at least one year and sold are considered long term capital gains/losses. Your state may also assess a capital gains tax.

At the Federal level, long term capital gains tax rates are 0%, 15%, and 25%, based on your total taxable income from all sources for the year and tax filing status (Single, Married Filing Jointly, etc.). This article has a handy chart with the rates and income amounts: A Guide to the Capital Gains Tax Rate: Short-term vs. Long-term Capital Gains Taxes 

A common strategy that is used to avoid capital gain taxes is tax loss harvesting. Essentially, other stocks/assets are sold at a loss to offset a capital gain from another asset sale. This article explains this strategy further: A Complete Guide to Tax Loss Harvesting 

[Terri Lynn]

Good afternoon, Misspag, and thank you for joining us!

You asked about how long term capital gains work.

Long-term capital gains refer to the sale of an asset that has been owned for over a year, and it is subject to capital gains tax rates. The tax rate for long-term gains are taxed at favorable rates of  0%, 15% or 20%, based on the individual's income and filing status.

To see where you fall please see below:

The long-term capital gains tax rates for 2024, based on filing status and taxable income, are as follows:

• For single taxpayers:

  • 0% for taxable income up to $47,025
  • 15% for taxable income between $47,026 and $518,900
  • 20% for taxable income over $518,900

• For head of household taxpayers:

  • 0% for taxable income up to $63,000
  • 15% for taxable income between $63,001 and $551,350
  • 20% for taxable income over $551,350

• For married taxpayers filing jointly:

  • 0% for taxable income up to $94,050
  • 15% for taxable income between $94,051 and $583,750
  • 20% for taxable income over $583,750

• For married taxpayers filing separately:

  • 0% for taxable income up to $47,025
  • 15% for taxable income between $47,025 and $291,850
  • 20% for taxable income over $291,850

Keep in mind that there are sometimes excptions to the special long term rates. 

• Collectible assets, such as antiques, fine art, coins, and valuable vintages of wine, are subject to a 28% long-term capital gains tax rate, regardless of how long you've owned the item.
• Individuals, estates, and trusts who meet a certain income threshold and have significant capital gains from investment, interest, and dividend income may also be subject to the Net Investment Income Tax (NIIT). This 3.8% surtax is applied to specific investment sales. Typically, the NIIT applies to individuals with high incomes.

For additional information on how to figure capital gains please use the following links:

• A TurboTax guide to Undersanding how Capital gains taxes work 
• Capital gains and Losses 

Please feel free to reach backout with any additional questions or concerns you might have!

Have a great rest of your day!

Terri Lynn, EA

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