Investment Taxes

Understanding Capital Gains: Navigating Taxes on Investment Income

Capital gains occur when you sell an investment for more than you paid for it. These gains are classified as either short-term (from assets held one year or less) or long-term (from assets held for more than one year).

Short-term capital gains are taxed at the same rates as ordinary income. However long-term capital gains rates are taxed at different rates, depending on your income bracket.

Long-Term Capital Gains Rates for 2024

Tax Rate Single Married Filing Jointly Head of Household
0%
$0 - $47,025
$0 - $94,050
$0 - $63,000
15%
$47,026 - $518,900
$94,051 - $583,750
$63,001 - $551,350
20%
$47,026 - $518,900
$47,026 - $518,900
$47,026 - $518,900

Additionally, individuals with adjusted gross income exceeding $200,000 (single filers or heads of household) or $250,000 (joint filers) may face an extra 3.8% tax as a net investment income tax.

Furthermore, the long-term capital gains rate for collectibles, such as coins or art, remain at a maximum of 28%.

Rules for Capital Losses

Capital losses can offset capital gains. If your losses exceed your gains, you can use up to $3,000 of those losses to reduce your taxes on other types of income. Should you have more than $3,000 in capital losses, you may be able to carry the losses forward. You can continue to carry forward until such time that future realized gains exhaust them. Under current law, you lose the ability to carry these losses forward only upon death.

Keep in mind that calculating capital gains or losses for some assets may not be straightforward. As with any tax-related matters, it’s wise to seek the advice of a tax professional before making decisions.

Source: IRS.gov, Topic no. 409, Capital gains and Losses

Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 24-183

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