Capital Gains

Capital Gains & Losses ## Short-Term vs. Long-Term The holding period determines whether a gain or loss is short-term or long-term. | Holding Period | Classification | |---|---| | 12 months or less | Short-term | | More than 12 months | Long-term | The holding period begins the day after acquisition and ends on the date of sale (inclusive). Short-term capital gains are taxed at ordinary income rates. Long-term capital gains are taxed at preferential rates (0%, 15%, or 20%). --- ## Long-Term Capital Gain Tax Rates (2024) The applicable rate depends on the taxpayer's taxable income, not AGI. | Rate | Single | Married Filing Jointly | |---|---|---| | 0% | Up to $47,025 | Up to $94,050 | | 15% | $47,026 – $518,900 | $94,051 – $583,750 | | 20% | Over $518,900 | Over $583,750 | Additional 3.8% Net Investment Income Tax (NIIT) applies to net investment income for taxpayers with MAGI above $200,000 (single) or $250,000 (MFJ), potentially bringing the effective top rate to 23.8%. --- ## Capital Gain and Loss Netting Rules Netting occurs within the same category first, then across categories: 1. Net all short-term gains and losses → net short-term gain (NSTG) or net short-term loss (NSTL) 2. Net all long-term gains and losses → net long-term gain (NLTG) or net long-term loss (NLTL) 3. Combine the results: | Outcome | Tax Treatment | |---|---| | NSTG + NLTG | NSTG taxed at ordinary rates; NLTG at preferential rates | | NSTG + NLTL | Net: if NSTG > NLTL, remainder taxed as ordinary income | | NSTL + NLTG | Net: if NLTG > NSTL, remainder taxed at preferential…