Understanding capital gains in light of new tax laws
The U.S. stock market this year has given total returns so far of close to 10 percent, which is a good thing for investors. But with the exception of savings in retirement accounts such as 401(k)s and individual retirement accounts (IRAs), Uncle Sam will probably take a cut of your newfound wealth in capital gains tax. An increase in the value of your assets is called capital gains, and how much tax you pay depends on how long you held the investments and how much other income you make. Long-term vs. short-term capital gains taxes Long-term capital gains applies to gains (increased value) on investments or other assets you’ve owned for more than a year. The current capital gains tax rates under the new 2018 tax law are zero, 15 percent, and 20 percent, depending on your income. This chart shows the brackets. 2018 long-term capital gains tax brackets For example, a married couple filing jointly pays no capital gains tax if their total taxable income is less than $77,200. They’ll pay 15 percent on capital gains if their income is between $77,201 and $479,000. For couples above that income level, the rate is 20 percent. In addition, capital gains may