How Is Tax on Capital Gains Determined?


Quick Answer

Capital gains taxes are determined by a variety of factors as of 2015, including the amount of time the security sold for gain was held and the income bracket of the person making the capital gains claim, according to TaxACT. The taxable capital gains amount is calculated by taking the sales price of a security minus the cost of selling less the adjusted cost basis.

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Full Answer

A short-term capital gain is a profit made from selling a security held less than a year, reports TaxACT. A long-term capital gain is a profit made from a security held for longer than a year. Examples of such securities may include stocks as well as homes and cars. Short-term capital gains are taxed in the same manner as wages and incomes. Long-term capital gains are not taxed at all up to a certain taxpayer income level, and they are taxed at 15 percent for the higher tax rates.

For taxpayers whose top income is in the 10 percent or 15 percent tax bracket, the capital gains tax rate is 0 percent, explains TaxACT. For those above this, the rate is 15 percent. This rate has been considered too low by certain analysts, and there has been a lot of political push to change the rates.

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