What is Tax Rate for Long Term Capital Gains?

Posted by on November 19, 2013
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Long Term Capital Gains Tax Rate is 15% for those with income between $36,901 - $406,750. For those earning over $406,750, long term gains are taxed at 20%.

Long Term Capital Gains are Taxed at a Different Rate Than Short Term Capital Gains

If you earned a profit in 2014 from selling an asset such as stock shares or a house, you’ll need to report it as a long term capital gain on your 2014 tax return.

Long term capital gains are taxed differently than short term gains and other income. In fact, long term capital gains are taxed at a lower rate.

What Are Long-term Capital Gains?

Long-term capital gains (LTCG) are the profits you make from selling an asset you’ve held for at least a year. For example, in most cases, if you made a profit from the sale of stocks, bonds, mutual fund shares or real estate, it would be considered a long-term capital gain.

When filing a tax return, you must report your long-term capital gains and pay tax on the gains.

However, there are a few exceptions. Those who do not have to pay tax on long term capital gains include;

  • Low-bracket income taxpayers. There’s a 0% rate for singles earning $9,075 or less during 2014.
  • Children under age 19 and under age 24 if a student, might qualify for 0% rate from the Kiddie Tax rule for the sale of stocks.
  • Sale of a primary residency.

What are the 2014 Tax Rates on Long Term Capital Gains?

There’s two tax rates for long-term capital gains; 15% and 20%, depending on what tax bracket you fall into. Those falling within the 25%-35% tax brackets are taxed 15%, while those falling within the 39.6% tax bracket face a 20% tax rate on long-term capital gains.

For Single Filers, 2014 Long Term Capital Gains Tax Rates are as follows;

  • Income $0 – $36,901: 0%
  • Income $36,901 – $406,750: 15%
  • Income $406,751 and over: 20%

When calculating long term capital gains, keep in mind the two following points;

  1. If your long-term capital gains bump you into a higher tax bracket, only gains above that threshold will be taxed at the higher rate.
  2. Single taxpayers making over $200,000 per year and couples filing jointly with income over $250,000 are taxed an additional 3.8% tax on investment income, this includes capital gains.

Saving Strategies

If you are strategic with your long term capital gains, you won’t end up paying huge tax rates. Here are some strategies on how to save on long-term capital gains tax rates:

  1. Invest in your residence: If you can, get that new roof put on, fix that kitchen sink, update your home and save all receipts. Why? Single filers can exclude up to $250,000 of gain on their primary residence and couples, $500,000.
  2. Look at your losses:  By listing losses, your capital gains will be offset.
  3. Give: Giving gifts to charity is a tax write-off. By giving appreciated stock to charity, you will have fewer capital gains that are taxed and also will receive a tax deduction.
  4. Move to a different state:  Moving to a tax-friendly state means your state capital gains taxes will decrease.
  5. Open a charitable trust: By opening a charitable trust, you put in $100,000 or more into a trust that pays you a certain income for life and when you die, the remainder goes to a charity. If you open a charitable trust and put your appreciated assets in it, you will avoid large capital gain taxes.
  6. Open a 529 College Savings Account: Opening a 529 college savings account allows you to set money aside tax-free and when it comes time to withdraw the money for education expenses, it’s also tax free, meaning you won’t have to pay a capital gains tax.
  7. Put money into your retirement accounts:  Adding money to retirement accounts, IRAs means you avoid paying taxes while the money is in the retirement account.

Report Your Long Term Capital Gains with RapidTax!

Calculating any sort of tax is complicated. Why do it yourself when you can use online tax software to do it for you?

With RapidTax, you can report all of your income, including your capital gains. If you have any questions while doing so, the RapidTax team is standing by via phone, chat and email to help!

Don’t forget part two of this article specifically addresses the rate changes for short-term capital gains.

It's simpler with RapidTax.

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This entry was posted on at 2:11 pm and is filed under Tax Rates and Calculator | Blog.

One Response to “What is Tax Rate for Long Term Capital Gains?”

  1. barbara h says:

    I have no earned income. I have $10,000 in social security. I have
    $175,000 in long term capital gains. Do I pay tax on my capital gains.

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