So if you have $20,000 in short-term gains and earn $100,000 in salary from your day job, the IRS considers your total taxable income to be $120,000. Your tax bracket is based on your income and filing status. Here’s how short-term capital gains tax rates for 2022 compare by filing status: Short-Term Capital Gains Tax Rates for 2022įor reference, here are the short-term capital gains tax rates for 2021: Short-Term Capital Gains Tax Rates 2021Īny short-term gains you realize are included with your other sources of income for the year for tax purposes. That means the tax on any investments you sell on a short-term basis would be determined by your tax bracket. The IRS uses ordinary income tax rates to tax capital gains.
This revenue is then used to fund government programs and spending. The IRS assesses capital gains tax as a means of raising revenue for the government.
So why does capital gains tax exist? One simple reason. The same may be true if you buy and sell antique cars as a hobby or side hustle. If you held the home for one year or less then you might owe short-term capital gains tax on the proceeds from the sale. You buy a home, invest some money in fixing it up, then sell it for a $40,000 profit six months later. Say you’re interested in flipping homes for profit, for example. But it’s also possible to be assessed short-term capital gains tax on the sale of other assets, such as real estate, vehicles or collectibles.
The short-term capital gains tax is typically applied to the sale of securities, including stocks and mutual funds. Short-term capital gains tax is a tax on gains resulting from the sale of assets you’ve held for one year or less.
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