A look at the many capital gains rates

15 percent tax rate for most

Tax-law changes in May 2003 lowered the top capital gains tax rate to 15 percent. This tax rate cut remains under ATRA for investors whose adjusted gross income is less than the thresholds for the top 20 percent rate.

The 15 percent rate also applies to some dividends that stocks and mutual funds pay account holders.

Remember, these rates are for long-term capital gains. In most cases, that means you have to hold an asset for more than a year before you sell it. If you cash it in sooner, you'll be taxed at the short-term rate, which is the same as your ordinary income tax level and could be as high as 39.6 percent on 2013 and future returns.

25 percent capital gains rate

While the lower capital gains rates for individual investors have received the most attention, at least on Capitol Hill, for the past few years there have been a couple of other categories of capital gains taxes.

A rate of 25 percent applies to part of the gain from selling real estate you depreciated. Basically this keeps you from getting a double tax break. The Internal Revenue Service first wants to recapture some of the tax breaks you've been getting via depreciation throughout the years. You'll have to complete the work sheet in the instructions for Schedule D to figure your gain (and tax rate) for this asset, known as Section 1250 property. More details on this type of holding and its taxation are available in IRS Publication 544, Sales and Other Dispositions of Assets.

28 percent capital gains rate

Two categories of capital gains are subject to this rate: small-business stock and collectibles.

If you realized a gain from qualified small-business stock that you held more than five years, you generally can exclude one-half of your gain from income. The remainder is taxed at a 28 percent rate. If you've already hired a tax professional to help you sort out the 25 percent rate on depreciable property, she can help you figure this tax, too. Or you can get the specifics on gains on qualified small business stock in IRS Publication 550, Investment Income and Expenses.

If your gains came from collectibles rather than a business sale, you'll still pay the 28 percent rate. This includes proceeds from the sale of a work of art, antiques, gems, stamps, coins, precious metals and even pricey wine or brandy collections.


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