Have you ever wondered why gains are separated between long-term and short-term when you receive your 1099 at tax time? There is a very good reason for that, and one you might want to consider more carefully when investing.
Short-term capital gains are derived if you hold an investment one year or less before disposing of it. Short-term gains are taxed as “ordinary income,” the same rate you pay on wages or business profits.
Long-term capital gains, on the other hand, are generally taxed no higher than 20% and could be taxed at 0%, depending on your income. See the table below:
Long-term capital gains tax rates 2024
| Tax Filing Status | Income range at 0% Rate | Income range at 15% Rate | Income range at 20% Rate |
| Single | Up to $47,025 | $47,026 – $518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051 – $583,750 | Over $583,750 |
| Married Filing Separately | Up to $47,025 | $47,026 – $291,850 | Over $291,850 |
| Head of Household | Up to $63,000 | $63,001 – $551,350 | Over $551,350 |
Exceptions to the long-term capital gains tax rate are collectibles such as art, jewelry, and precious metals. These are taxed at 28% regardless of your income. Bear in mind, though, that tax rates on ordinary income range from 10% to 37%.
Be sure to keep this information in mind when managing your investments. It could make a BIG difference come tax time!
If you have questions about short-term or long-term capital gains, contact KRD at 847-240-1040 or contact us online.