If you have sold any asset this year, then continue reading this post. When a citizen sells an asset which can be a physical asset like home and car or intangible assets that include stocks, bonds, cryptocurrency and mutual funds, then the capital gains tax will be imposed on the profit made on the sale. In simple terms, the capital gains tax is defined as the tax imposed on the sale of an asset. As compared to making an early sale, holding an asset for more than a year may result in greater benefits based on what you are selling. It is to notify that the tax will not be levied on an asset until a sale has been made. For instance, if a citizen holds stocks, then the tax will not incur on them until they are sold.
If sold at profit, several types of investments may consider as capital gains like real estate, mutual funds, etc. Depending on how long did you hold the assets before selling it, the capital gains are categorized into two parts which we will discuss later in this post. On continuing to this post, you will be able to gain all the necessary awareness on Capital gains tax as well as its types, which types of investments incur it and capital gains tax rate of year 2023 and 2024.
What is Capital Gains and Capital Gains Tax
- Investments including cars, homes, stocks, bonds, mutual funds, cryptocurrency, etc. are considered as ‘capital assets’ by the Internal Revenue Service (IRS). And if you are able to sale the capital assets on a higher value as compared to its original value, then the profit made on the sale will be considered as Capital Gains. However, the profit made on an asset may depend on certain factors like your filing status, taxable income and how long did you hold the asset before selling it. On the other side, if the asset is sold for less than its original value, then it will be looked upon as Capital Loss. The difference between the capital gains and the capital loss will be your profit. The capital gains are categorized into short-term capital gains and long-term capital gains.
- When a profit is made on the sale of an asset, then capital gains tax will be imposed on it. As previously discussed, the profit may depend on what you have sold and how long did you hold it before selling it. Generally, if you hold the assets for more than a year before you sell it, then your capital loss or capital gain will be long term. Similarly, if you hold the assets for a year or below, then your capital loss or capital gains will be short term. For long term capital gains, the tax rate for year 2023 is 0%, 15% and 20% which depends on your income. On the other side, short term capital gains follow the tax rate for year 2023 with 10%, 12%, 22%, 24%, 32%, 35% or 37%.
What are IRS Bonus Payments in 2024?
Capital Gains Tax 2024 Quick Details
| Post title | Capital Gains Tax |
| Country | The USA |
| Department | Internal Revenue Service (IRS) |
| Category | Taxation |
| Year | 2024 |
| Official website | www.irs.gov |
Types of Capital Gains Tax
As previously mentioned, the capital gains tax is categorized into two kinds which are short term capital gains and long term capital gains:
- Short Term Capital Gains: Short term capital gains are defined as the profits made by selling an asset held for one year or less. These are taxed according to ordinary income tax brackets: 10%, 12%, 22%, 24%, 32%, 35% or 37%.
- Long Term Capital Gains: The long term capital gains are defined as the profit made by selling an asset held of more than a year. Depending on your taxable income and filing status, the tax rate for long term capital gains is 0%, 15% and 20% by the IRS.
Capital Gains Tax Rate in 2023 and 2024
The long term capital gains tax rate in 2023 are 0%, 10% and 15% based on your filing status and taxable income. You can take a look at the capital gains tax rate in 2023 and 2024 in the following tables:
For year 2023
| Status | 0% | 15% | 20% |
| Single | $46,625 | $44,625 to $492,300 | Over $492,300 |
| Head of household | $59,750 | $59,750 to $523,050 | Over $523,050 |
| Married filing jointly | $89,250 | $89,250 to $553,850 | Over $553,850 |
| Married filing separately | $46,625 | $44,625 to $276,900 | Over $276,900 |
For year 2024
| Status | 0% | 15% | 20% |
| Single | $47,025 | $44,625 to $518,000 | Over $518,000 |
| Head of household | $63,000 | $59,750 to $551,350 | Over $551,350 |
| Married filing jointly | $94,050 | $89,250 to $583,750 | Over $583,750 |
| Married filing separately | $47,025 | $44,625 to $291,850 | Over $291,850 |
Which Types of Investments Incur Capital Gains Tax?
If sold at a profit, several types of investments may be considered as capital gains. For instance:
Real Estate
If you buy or sale a property which can include your primary residence, then the profit will be regarded as capital gains. However, in order to be eligible for excluding first $250,000 as an individual or $500,000 as a married couple, you can check the below mentioned eligibility criteria:
- You owned the house for two years in last five years.
- You were a permanent resident of the house for two years in last five years (also applicable for married couple).
- You must have not sold any other house in last two years.
- You must not trade another property to own the property you are selling.
Stocks
If you have sold stocks, then the profit made on the sale will be considered as your income and you must have to pay capital gains tax. If the stocks see a rise and you did to choose to sell it, then it will be regarded as unrealized gains.
Digital Currency
Profit made on the sale of digital currency will also be looked upon as capital gains and a person will have to pay capital gains tax. Some examples of digital currency are as follows:
- Cryptocurrency
- Stablecoins
- Convertible Virtual Currency
- Non-fungible tokens (NFTs), etc.
Apart from the aforementioned types, there are many other investments by which if a profit is made, that can be regarded as capital gains. For instance, bonds, mutual fund shares, etc. For more information related to capital gains tax, you can also visit the official website of the Internal Revenue Service.
| Sass News Home | Click Here |
As a Editor at Sass News Portal ,Lara skillfully combines her knowledge of political economy and personal finance to empower readers with crucial insights and answers to their most pressing questions. With her finely honed analytical skills and a commitment to providing accurate coverage of today’s pressing issues, Lara strives to engage readers across a wide range of topics.