The American Taxpayers Relief Act, Capital Gains Tax Information Update for 2013
How do you ascertain the capital gains rate that's applicable? Your federal tax bracket that's applicable will ascertain your tax on capital gains .
Capital gains rates applicable are listed below:
3.8% surtax examples and the tax on capital gains Example #1: Mr. Jones has a $220,000 AGI ($160,000 wages plus $60,000 of investment income). Now, he has a $20,000 AGI above the $200,000 individual threshold. He will be paying the new 3.8% surtax upon the lesser amount of his income on investments (i.e. $60,000) or an amount above his $200,000 tax threshold (i.e. $20,000).
Thus, Mr. Jones must pay a 3.8% surtax upon this $20,000. In addition, since he has a $220,000 AGI, this puts him in the federal tax bracket of 25% and he will also be subject to this capital gains rate of 15%. Thus, his entire tax on capital gains is now 18.8%.
Example #2: Mr. and Mrs. Brown have a $180,000 AGI ($140,000 in wages plus $40,000 in investment income). They must pay a 3.8% surtax upon the lesser amount of their income on investments (i.e. $40,000) or any excess above this threshold (i.e. $0). And since $0 is a lesser amount, they will be paying $0 surtax. But, since they have an $180,000 AGI, it puts them in the federal tax bracket of 25% and they are going to be subject to a 15% tax on capital gains.
A 3.8% surtax is applicable to "any net investment income". Generally, "net investment income" consist of, although not limited to: dividends, interest, royalty and rental income, capital gains, income from businesses which are involved in the trading of commodities or financial instruments, non-qualified annuities, and businesses having passive income to the taxpayer. Mar 14, 2013 ✓