Capital Gains Tax Rates

Capital Gains Tax Rates

First of all, how much are capital gains tax rates?  Federal income tax law generally applies lower tax rates to long-term capital gains income. Long-term means assets held longer than one year.  What are the capital gains tax rates for 2013?  For 2013 and succeeding tax years, the long-term capital gains tax rate depends on a taxpayer’s ordinary income tax bracket:

  1. 0% long-term capital gains rate applies if a taxpayer is in the 10% or 15% tax brackets;
  2. 15% long-term capital gains rate applies if a taxpayer is in the 25%, 28%, 33%, or 35% tax brackets; and
  3. Finally, a 20% long-term gains rate applies if a taxpayer is in the 39.6% tax bracket.

Qualified Dividends

Furthermore, these long-term capital gains tax rates (0%, 15% or 20%) also apply to qualified dividends.  Qualified dividends are dividends from the stock of a domestic corporation or a qualifying foreign corporation.  In addition, the taxpayer must hold the stock “for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.”  IRS Publication 550, Investment Income and Expenses.