Tax Guide |
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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.
Gain or loss is long-term if you owned for more than a year. Although short-term capital gain is taxed at ordinary income tax rates, long-term capital gains of noncorporate taxpayers are generally taxed at lower rates.
The long-term capital gains tax rate depends upon the type of property and an individual's tax bracket.
For most property, the maximum capital gains rate for higher-income individuals (those that are not in the 10 percent or 15 percent tax brackets) is 15 percent. For 2014, the capital gains tax rate is zero percent for individuals in the 10 percent and 15 percent tax brackets. Thus, the gain on the sale of a capital asset is tax-free for a married couple who files jointly and has a taxable income of $73,800 or less in 2014 and for singles with taxable income under $36,900.
However, taxpayers whose adjusted gross income puts them into the 39.6 percent tax bracket will face a maximum capital gains rate of 20 percent. Also, higher-income taxpayers may face the 3.8 percent tax on net investment income. Thus, for certain taxpayers, the effective captial gains tax rate could be 23.8 percent.
Special rates for certain property. Capital gains on collectibles (e.g., stamps, antiques, gems, and most coins) are taxed at 28 percent. Unrecaptured gain from the sale of depreciable real estate is taxed at 25 percent.
Qualified Small Business Stock. In order to encourage investment in qualified small business stock, Congress has passed a number of laws that provide tax breaks when that stock is sold, provided that the seller has held the stock for more than five years. Gain on sales of qualified small business stock is taxed at 28 percent, but much of the gain can be excluded from income. IRS Publication 550, Investment Income and Expenses, provides more information regarding what types of stock qualify.
| Date Stock Acquired | Rate on Gain not Excluded from Income | Percent Excluded from Gross Income |
| After 12/31/2014 | 28% | 50% |
| After 9/27/2010 but before 1/1/2015 | N/A | 100% |
| After 2/17/2009 but before 9/28/2010 | 28% | 75% |
| After 8/10/1993 but before 2/18/2009 | 50% |
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