Capital gains are the profits from the sale of an asset which could be shares of stock, a piece of land, a business. How long you have had the asset before selling will dictate how and how much you will be taxed on your profits.
In 2020 the capital gains tax rates are either 0%, 15%, or 20% for most assets held for more than a year. Capital gains tax rates on most assets held for less than a year are taxed at your tax bracket. (10%, 12%, 22%, 24%, 32%, 35% or 37%).
Short-term capital gains tax – is a tax on profits from the sale of an asset held for one year or less. The short-term capital gains tax rate equals your ordinary income tax rate.
Long-term capital gains tax – is a tax on profits from the sale of an asset held for more than a year. The long-term capital gains tax rate is 0%, 15% or 20% depending on your taxable income and filing status. They are generally lower than short-term capital gains tax rates.
Typically the best way to minimize capital gains taxes is to HOLD ON. Whenever possible, hold an asset for a year or longer so you can qualify for the long-term capital gains tax rate, since it’s significantly lower than the short-term capital gains rate for most assets.
If you have questions about the best way or you to save money on Capital Gains taxes, please reach out to your CPA.
Thank you for letting PCS help you with your taxes.