What Is the Capital Gains Tax in 2017?
The capital gains tax is a tax imposed on the profit earned from the sale of an asset that has appreciated in value. This includes assets such as stocks, bonds, real estate, and other investments. In the United States, the capital gains tax is levied at both the federal and state levels. The tax rate depends on various factors, including the length of time the asset was held and the taxpayer’s income level.
In 2017, the capital gains tax rates remained largely the same as in previous years. For individuals in the highest tax bracket, the long-term capital gains tax rate is 20%. However, taxpayers in lower income brackets may qualify for a reduced rate of 0%, 15%, or 18.8%. The short-term capital gains tax rate is generally the same as the taxpayer’s ordinary income tax rate.
The capital gains tax is classified into two categories: short-term and long-term. Short-term capital gains are for assets held for one year or less, while long-term capital gains are for assets held for more than one year. The tax rates for short-term capital gains are the same as ordinary income tax rates, which range from 10% to 37% depending on the taxpayer’s income level.
FAQs about the Capital Gains Tax in 2017:
1. Do I have to pay capital gains tax on the sale of my primary residence?
No, if you meet certain criteria, you may be eligible for a capital gains exclusion of up to $250,000 for individuals or $500,000 for married couples filing jointly.
2. Are there any special rules for capital gains tax on collectibles?
Yes, the tax rate for collectibles, such as art or antiques, is capped at 28%, regardless of the taxpayer’s income level.
3. How do I calculate my capital gains tax?
To calculate your capital gains tax, subtract your adjusted basis (purchase price plus any improvements or expenses) from the selling price of the asset. The resulting profit is subject to the applicable tax rate.
4. Can I offset capital gains with capital losses?
Yes, you can offset capital gains with capital losses. If your capital losses exceed your capital gains, you can use the remaining losses to offset up to $3,000 of other income, such as wages, and carry forward any excess losses to future tax years.
5. What is the difference between short-term and long-term capital gains tax rates?
Short-term capital gains are taxed at the taxpayer’s ordinary income tax rates, while long-term capital gains are taxed at a lower rate, ranging from 0% to 20%, depending on the taxpayer’s income level.
6. Are there any exceptions to the capital gains tax?
Certain types of investments, such as qualified small business stock or investments in economically distressed areas, may be eligible for capital gains tax exemptions or deferrals.
7. Can I defer paying capital gains tax by reinvesting the proceeds in another asset?
Yes, by utilizing a Section 1031 exchange, also known as a like-kind exchange, you can defer paying capital gains tax by reinvesting the proceeds from the sale of one asset into another similar asset.
8. Does the capital gains tax rate differ for individuals and corporations?
Yes, corporations are subject to different capital gains tax rates, with a maximum rate of 21% for long-term gains.
9. Can I reduce my capital gains tax liability through charitable donations?
Yes, donating appreciated assets to qualified charitable organizations can eliminate the capital gains tax on those assets and provide a charitable deduction on your tax return.
10. Are there any exclusions for capital gains from the sale of small businesses?
Yes, under certain conditions, individuals who sell their small business may be eligible for a capital gains exclusion of up to $500,000.
11. How do I report capital gains on my tax return?
You must report capital gains on Schedule D of your federal tax return, along with any necessary supporting documents such as Form 1099-B.
12. Are there any additional taxes associated with capital gains?
In addition to the capital gains tax, high-income taxpayers may be subject to the Net Investment Income Tax (NIIT) of 3.8% on their investment income, including capital gains.
In conclusion, the capital gains tax is a tax on the profit earned from the sale of appreciated assets. The rates for 2017 remained similar to previous years, with a maximum long-term capital gains tax rate of 20%. Various exceptions, exclusions, and strategies can help taxpayers reduce their capital gains tax liability. It is important to consult with a tax professional for personalized advice based on your individual circumstances.
