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Page 11 of 63 |
How are capital gains taxed? |
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Short-term capital gains are taxed like any other income. Long-term gains are taxed at special rates. In 1997, gains from capital assets held 12 but less than 18 months were originally taxed at a maximum rate of 28%, and gains from capital assets held at least 18 months were taxed at a maximum rate of 20%. In 1998, Congress lowered the holding period for the 20% rate to just 12 months; in 2003, Congress reduced the 20% rate to 15% for assets held more than one year from 2003 through 2008. For taxpayers in the 10 and 15% tax brackets, the rate on capital gains is reduced to 5% in 2003 through 2007, and to zero through 2010 (extended in May, 2006). The tax rate on short-term capital gains is at the ordinary income rate. The special tax rates for gains on assets held for more than five years was repealed.
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