Tax Rate on Capital Gains

Business property that is held for one year or less is considered to be held on a short-term basis. If you sell, scrap, retire, or otherwise dispose of a short-term capital asset, any related gains will be taxed at your ordinary income tax rate. However, if the property was held for more than one year, gains on it will generally be treated as long-term capital gains. This is important because long-term capital gains are taxes as a far lower tax rate than ordinary income.

Capital gains rates. The maximum capital gains rate is set at 15 percent on adjusted net capital gain for most property and most taxpayers (for regular tax and AMT purposes.) However, if you are in the 10-percent or 15-percent tax bracket, then your tax rate is zero percent. This means that if you file a joint return with your spouse and your taxable income is not over $70,700 in 2012, you will pay no tax on gain from property disposed of during the year.

Warning Beginning in 2013, taxpayers who fall into the top individual tax bracket (39.6 percent) will face a 20 percent captial gains tax.

Gains from the sales of collectibles (such as coins and stamps) are taxed at 28 percent.

Exceptions to capital gains treatment. An important exception to the special rate for capital gains is any gain that represents recaptured depreciation. Also, in some cases sales to close family members or controlled business entities might not be eligible for capital gains treatment, or for deduction of a capital loss.