Capital Gain Taxes

Paying capital gain taxes is inevitable. If you make money selling capital assets then you owe the IRS capital gain taxes. But, how much capital gain taxes you pay depend on many factors and variables. The capital gain tax laws have also changed many times over the past years making it harder for a lot of investors to understand how capital gain taxes work and what rates of capital gain taxes they are paying.

Currently, the long term capital gain tax rates are 5%, 15%, 25%, and 28%. The most common capital gain taxes are assessed at 5% or 15%. The other two capital gain tax rates are less common for tax payers. So, what capital gain tax rate are you paying?

First of all, long term capital gain taxes are less than short term capital gain taxes. So, if you hold capital assets for more than a year, you will owe long term capital gain taxes, not short term capital gain taxes or regular income taxes.

Changes in capital gain tax laws in May 2003

In the past, high income tax payers owed capital gain taxes at the rate of 20% while lower income tax payers owed capital gain taxes to the IRS of only 10%. The change in the capital gain tax laws in May 2003 made capital gain taxes more attractive to all income type tax payers. The high income taxpayers now pay 15% capital gain taxes while low income taxpayers pay 5% capital gain taxes. This change in capital gain tax law was due to end on December 31, 2008.

Changes in capital gain tax laws in May 2006

In May 2006 the lawmakers decided to amend the capital gain tax laws a little more. They extended the low capital gain tax rates set forth in May 2003 to expire in 2010. The low rates of capital gain taxes caught much attention among the lawmakers as well as investors who enjoy paying lower capital gain taxes on their capital gains.