Tax Capital Gain
In the United States you pay taxes on al of your income and on the total of all their capital gains, which is any money made on the sale of a investment over the amount that they paid for it. These capital gains are usually taxed at comparable levels to normal income taxes.
he reason for this is to provide incentive for investors to keep investing an make these capital investments and keep up with entrepreneurial activities which help out the economy.
The amount that you will actually be taxes on these capital gains will be determined by the current capital gains tax rate. There are two types of capital gains which you will need to know about. There are short-term and long-term capital gains taxes. Short term capital gains are investments sold in under 1 year and long term are those kept for longer than a year.
On short term capital gain you are taxed at your normal tax rate, which is determined by your tax brackets that are federally put out every year. For example if your normal tax rate is 10% then your tax on capital gains that are short term is also 10%.
Long term capital gains are taxes at lower rates then those held for shorter terms meaning they are also taxed at lower rates then your normal income taxes. The rates are currently under a sunset provision which will last until through 2010. If your income tax rate was 10% or 15% then the amount of capital gains tax you will pay is none. If you are in any tax bracket above 25% then you will pay 15% on all long term capital gains that you may make.
The reason they tax you on longer term investments less than they tax you on short term ones is generally because you have put more time and money into them and also because they have to think about inflation and deflation and how that has affected you over the years.
Capital gains can get tricky but usually only when someone has a lot of investments that they are needing to pay their taxes on. The more investments and capital gains that you have the more that you have to keep track of which sometimes causes problems for people. capital gains taxes guides are a great way to check to see what taxes you will owe before you own them.
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