Question

Why do you think Congress has established different maximum tax rates on capital gains of individuals?

Typically we think of capital gains in terms of the sale of investments, such as stocks and bonds. But through what other asset types do these rules apply? considering holding periods, and any other considerations.

Answer 1

Capital gain tax is the tax on capital gain arising on sales of certain types of assets.

There are various rules regarding capital gain tax rates depending upon fulfillment of various conditions which are explained and described as follows :-

1 . Firstly it is important to note that long term capital gain on assets which are being hold for more than 1 year is chargeable at different rate from other type of income and capital gain.

2. Taxpayers who are getting covered under two lowest tax brackets between 10 to 25% are not required to pay capital gain tax.

3 . Taxpayers who fall in the top bracket has to pay 20% tax on capital gain arising to them.

4. Capital gains from certain depriciated real estate or things of art attracts tax rate from 25 to 28%.

5. Tax rate on capital gain from short term capital gains on assets which are held for less than a year is same as to the tax rate on other type of income.

6. Also an individual tax return filer who is having capital gain of upto $250000 from sale of primary residence who is fulfilling ownership and usage test is not required to pay any tax on such capital gain

7 . In case of married couple limit given in 6 can be extended to $500000.