Capital Gains Tax Usa Short Term

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Capital Gains Tax: Short-Term vs. Long-Term Rates

Understanding the Tax Rates

Whether you pay the short-term or long-term capital gains tax rate depends on the holding period of your investment.

Short-Term Capital Gains

Short-term capital gains are generated from the sale of an asset held for a year or less. These gains are taxed as ordinary income, meaning they are subject to your marginal income tax rate, which can range from 0% to 37%.

Long-Term Capital Gains

Long-term capital gains, on the other hand, result from the sale of an asset held for more than a year. These gains are subject to preferential tax rates, which are significantly lower than ordinary income tax rates. The long-term capital gains tax rates range from 0% to 20%, depending on your taxable income.

Key Considerations

* The holding period for capital gains tax purposes starts the day after you acquire the asset and ends the day you sell it. * Only the amount of gain, not the entire sale price, is subject to capital gains tax. * There are exceptions to these general rules, such as for certain types of collectibles and real estate. * It's essential to consult a tax professional to determine your specific capital gains tax liability.

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