What capital gains tax rates apply to capital assets held more than five years?

When capital assets are held for more than five years, the capital gains tax rates are either 5% or 15% depending on your tax brackets. The capital gains tax rates used to be different for special capital assets. However, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA 2003) eliminated the special capital gains tax rate for capital assets held for more than five years.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA 2003)

There were some taxpayers who made "deemed sales" of their capital assets in 2001 in order to take advantage of a five-year capital gains tax rate which was going to go into effect in 2006. JGTRRA 2003 moves that 2006 date up to 2009. Taxpayers who made the deemed sale in 2001 and sell those assets in 2006 through 2008 will not receive special five-year capital gains tax rate treatment. Instead the sales will be considered merely long-term.

Capital gains tax rates for Dividends

• Long-term capital gains tax rates are now the same rate as dividends. The long term capital gains tax rate is 15% for high-income taxpayers and 5% for low-income taxpayers.

• Short-term capital gains tax rates remain at ordinary income tax rates.

• These capital gains tax rules apply to sales made on or after May 6, 2003. You will be subject to the 20% long-term capital gains tax rate for sales made from January 1 to May 5, 2003. It is unclear right now how 1099-Bs will reflect these pre- and post-tax bill changes.