Taxation of Long Term Capital Gains

One of the advantages of investing is that gains on the sale of capital assets (which includes most property purchased for investment) is taxed at a lower rate than most other forms of income, provided the property has been held for more than one year. A bankruptcy lawyer for example will pay a significantly lower tax on the gains from stocks he has held for three years than he will pay on his earned income.

The long term capital gains rate vary depending on what type of property is involved and what the taxpayer’s income tax rate would be, if the sale proceeds did not count as long term capital tax rates. Thus the tax rate on the long term capital gain for most assets will be a low as 0% or as high as 20% depending on his tax bracket. Long term capital gain from real property that has been depreciated can be as such as 25%, and capital gain from collectibles that have been held for more than a year can be as high as 28%.