In additional to the federal capital gains tax rates, your capital gains will also be subject to state income taxes. Many states do not have separate capital gains tax rates. Instead, most states will tax your capital gains as ordinary income subject to the state income taxes rates.
Tax Rate on Short-Term Capital GainsCapital gain income from assets held one year or less is taxed at the ordinary income tax rates in effect for the year, ranging from 10% to 35%.
Tax Rate on Long-Term Capital GainsCapital gain income from assets held longer than one year are generally taxed at a special long-term capital gains rate. The rate that applies depends on which ordinary income tax bracket you fall under.
- Zero percent rate if your total income (including capital gain income) places you in the ten or fifteen percent tax brackets.
- 15% rate if your total income (including capital gain income) places you in the twenty-five percent tax bracket or higher.
Tax Rates on Dividend IncomeDividends are classified either as ordinary dividends or as qualified dividends. Ordinary dividends are taxed at ordinary tax rates for whatever tax bracket you are in. Qualified dividends are taxed at the long-term capital gains tax rates of zero percent or 15% percent rate. To be eligible as a qualified dividend, the dividends must be from a domestic corporation or a qualifying foreign corporation and you must hold the stock "for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date." (Publication 550.)
Tax Rate on Collectible AssetsCollectibles held longer than one year are taxed at a 28% rate. Short-term gains on collectibles are taxed at the ordinary income tax rates.
Tax Rate on Recaptured Depreciation of Real PropertyReal property that has been depreciated is subject to a special depreciation recapture tax. A special 25% tax rate applies to the amount of gain that is related to depreciation deductions that were claimed or could have been claimed on a property. The remainder of the gain will be taxed at ordinary rates or long-term gain rates, depending on how long the property was held.
Planning Ahead for 2013Starting with the year 2013, there will be a new long-term capital gains rate of 20% which applies to taxpayers who fall within the new 39.6% tax bracket. The new capital gains tax rates for 2013 and future years are as follows:
- 0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,
- 15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and
- 20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket.
Also beginning in 2013, capital gain income will be subject to an additional 3.8% Medicare tax for taxpayers with income at or above a certain threshold.