Current:Home > FinanceWhat is capital gains tax in simple terms? A guide to 2024 rates, long-term vs. short-term -CoinMarket
What is capital gains tax in simple terms? A guide to 2024 rates, long-term vs. short-term
View
Date:2025-04-22 04:07:37
Tax season can feel like a minefield for new and old filers alike. Whether you work with a professional or file on your own, landing on the exact number amount you owe Uncle Sam (and vice versa) requires tireless calculation.
An important part of this calculus is the capital gains tax – a government levy on profits reaped from investments. It applies to everything from your stock portfolio to your jewelry drawer.
Here's what you should know about the capital gains tax, including the 2024 rates and the difference between short-term and long-term profits.
What is capital gains tax?
Let's start at the beginning. What are capital gains? They refer to any profit you make from buying an asset at one price and selling it off at a higher price.
All capital gains, like other profits, are subject to taxes. But there are caveats. For example, if you have a stock with a share price of $100 and it rises to $200 — that is a 'capital gain' but not one that you will be taxed on unless you 'close your position,' meaning you sell that stock for the cash value.
Once you sell the stock and realize the actual capital gain (in this case $100) you can be taxed on that difference.
Long-term capital gains vs. short-term
A short-term capital gains tax is levied on the profits of investments that were sold after being held for a year or less. They are taxed at the same rate as your income. The IRS's tax brackets determine the tax you pay for each portion of your income.
Long-term capital gains tax is applied to investments that have been held for over a year before they were sold for a profit. Long-term capital gains are generally taxed at a lower rate. For the 2024 tax year, the highest possible rate is 20%.
Tax season 2023 officially started: Here are key deadlines to keep in mind.
IRS may owe you from 2020 taxes: Here's why and what you need to do to find out if you're owed
What qualifies for capital gains tax?
Capital gains taxes are not exclusive to the stock market. Anything considered a "capital asset" is subject to the tax. Essentially, any investment made that could appreciate and create a profit is fair play.
Capital gains tax applies to:
- real estate
- bonds
- mutual funds
- NFTs/cryptocurrency
- jewelry/coin collections
What is the 2024 capital gains tax rate?
The amount that you will be taxed on capital gains depends on how long you have held a certain capital asset (long-term vs. short-term) and your income (what tax bracket you fall in.)
For short-term gains, you can follow the regular guide for income tax to see how much you will pay for profits.
The long-term capital gains tax rates for both the 2023 and 2024 tax years are 0%, 15%, or 20%. The higher your income, the more you will have to pay in capital gains taxes.
The rate is 0% for:
- Unmarried individuals filing separately with a taxable income less than or equal to $47,025
- Married filing jointly with a taxable income less than or equal to $94,050
- Head of household with a taxable income less than or equal to $63,000
The rate is 15% for:
- Unmarried individuals filing with a taxable income between $47,025 and $518,900
- Married filing separately with a taxable income between $94,050 and $583,750
- Head of household with a taxable income between $63,000 and $551,350
The rate is 20% for
- Anyone whose taxable income is above the 15% threshold in their category
Contributing: Olivia Munson
veryGood! (12)
Related
- What to watch: O Jolie night
- Are you suddenly lactose intolerant? This is why.
- How the Samsung Freestyle Projector Turned My Room Into the Movie Theater Haven of My Dreams
- OnlyFans Model Courtney Clenney’s Parents Arrested in Connection With Evidence Tampering in Murder Case
- DoorDash steps up driver ID checks after traffic safety complaints
- Jennifer Lopez, Lady Gaga and More Stars Whose Daring Grammys Looks Hit All the Right Notes
- Russell Brand denies 'very hurtful' assault allegations in Tucker Carlson interview
- West Virginia construction firm to buy bankrupt college campus
- Travis Hunter, the 2
- Taylor Swift and the Grammys: Singer could make history this weekend
Ranking
- 'Vanderpump Rules' star DJ James Kennedy arrested on domestic violence charges
- 2 homeowners urged to evacuate due to Pennsylvania landslide
- NCAA spent years fighting losing battles and left itself helpless to defend legal challenges
- Former Trump official injured, another man dead amid spike in D.C. area carjackings
- 'Most Whopper
- House approves major bipartisan tax bill to expand child tax credit, business breaks
- Jersey Shore's Sammi Sweetheart Giancola Details Reuniting With Ex Ronnie Ortiz-Magro
- Man who faked disability to get $600,000 in veterans benefits pleads guilty
Recommendation
'No Good Deed': Who's the killer in the Netflix comedy? And will there be a Season 2?
The fight over banning menthol cigarettes has a long history steeped in race
Alec Baldwin pleads not guilty to involuntary manslaughter in 'Rust' shooting case
Parents of OnlyFans model charged with murder arrested on evidence-tampering charges: Report
Intellectuals vs. The Internet
How Heidi Klum Reacted After Daughter Leni Found Her Sex Closet
Justin Timberlake Wants to Apologize to “Absolutely F--king Nobody” Amid Britney Spears Backlash
New Mexico House advances plan to boost annual state spending by 6.5%