Long term capital gains originated from investments held for over a year and is taxed as per the graduated thresholds of taxable income which is at rates of:

  • 0%
  • 15% or
  • 20%

Then there’s the short capital gain. This is more of the results from assets owned for less than a year and is taxed on ordinary income. As per tax on long-term capital gain, it is oftentimes lower than if same assets were sold in less than 12 months.

How Capital Gains Work?

As for income, short-term gains are then hit with among the 7 tax rates which correspond to tax brackets; 5 of which exceeded the highest rate possible that you will pay on long-term capital gain. Taxpayers who have taxable income of above $434,550 regardless of status will be subject to highest rate of long-term gains.

As for gains, these are calculated on basis in asset.

Formula: What you paid to obtain it – Depreciation + Costs of Sale + Costs any improvements made

You are eligible in inheriting basis of the donor when the asset is given as gift.

Expounding Financial Gains

With capital gains policy, it is encouraging individuals to hold asset for a period of 12 months or maybe more. Taxable assets may consist of precious metals, real estate, bonds and stocks.