[COLUMN] Long-term capital gains new tax rates

Biden tax plan series

WHAT are capital assets, capital gains and long-term capital gains?

When you sell a capital asset for more than you paid for it, you realize a capital gain. Capital assets include stocks, bonds, and real estate. The tax you’ll pay on the capital gain depends on how long you held the asset before selling it: long term if you held asset for more than one year; short term if one year or less.

Current tax law

  • Capital gains are currently taxed at a low maximum rate of 20%.
  • Qualifying dividends also enjoy this low rate of 20%.
  • Individuals pay a federal income tax rate ranging from 0 to 20% in taxes on realized capital gains when selling an asset that is held longer than 12 months.
  • Taxpayers over certain thresholds pay an additional 3.8% Net Investment Income Tax. Ouch!

Proposed tax changes

  • New law would raise capital gains tax rate to the proposed highest marginal ordinary income tax rate of 39.6% for those with AGI of $1 million or greater.
  • New law would also tax qualified dividends to the proposed highest marginal income tax rate, 39.6% for those with AGI of $1 million or greater.
  • The Net Investment Income Tax of 3.8% would also apply to all income exceeding $400,000.
  • Combined rates would result in a total tax of 43.4% on long-term capital gains for those with AGI of more than $1 million per year. Ouch!

* * *

Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.

* * *

He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies.  He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

 

Victor Sy, CPA, MBA (retired)

Victor Santos Sy, MBA. CPA (Retired) Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation. * * * He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

No Comments Yet

Leave a Reply

Your email address will not be published.

The Filipino-American Community Newspaper. Your News. Your Community. Your Journal. Since 1991.

Copyright © 1991-2021 Asian Journal Media Group. All Rights Reserved.