Capital Gains Tax Rate - Your Ultimate Guide

The principle that is always used by money investors is long term investment. It does not just give you a greater chance of making profits more, it will also save you some money on the tax that you will be paying.

Actually, the capital gains tax rate that you pay will depend on some things like the time you bought the property, the time you sold the asset, your general income level, and will sometimes depend also on what changes are made on the tax code.

Nowadays, capital gains taxes are almost forgotten. Other tax payers who belong in the two lowest tax groups may end up without a tax bill. On some cases, zero capital gains apply for some tax payers. Other investors will notice that they are taxed at a rate of 15 per cent. Other rates like 25 and 28 per cent apply for some special conditions.

A common thing that the different tax levels have in common is that they are also called as long term capital gains. This also means that these capital gains tax rates apply to properties that are held for at least 366 days or more than a year.

The tax demand offered by the long term capital gains tax rate is usually lesser than what you pay on your normal income. It is actually the tax payer's level of income that can determine which among the capital gains tax rate will apply.

If the profit of your investment lifts you to a higher group or bracket, you may probably be taxed at a combination of rates. Also, you could be asked to pay another rate dependent on the type of asset that you are trying to sell.

For investors who belong in the 10 to 15 per cent income tax brackets, they receive no tax billing. This is called zero capital gains tax rate. This took effect last year.

Before, people who belong to this group had to give 5 per cent of their long term capital profits and that any long term property they sell shall be exempted from capital gains taxes.

For you to be able to qualify for the zero tax rates, married people must make not more than $65,100 while single people must earn half of that or lesser for them to have zero tax rate for assets or properties that they have acquired for more than one year.

Although low income people most likely are not investors, the tax benefit can actually help other individuals like retirees who have meager or no income.

Before the administration of George Bush, those investors who have total income which belong to the upper four groups of tax payers had to pay a tax rate of 20 per cent while those at the bottom brackets had tax rates of 10 per cent.

However, changes in the tax law last May of 2003 decreased the tax rates by 5 per cent each and as mentioned before, eventually became zero percent during 2008.