![]() ![]() ![]() The 2017 tax act lowered most tax rates on ordinary income and modified the tax brackets that apply to that income but did not change the rates or tax brackets applicable to long-term capital gains and qualified dividends. Because no tax on long-term capital gains is due on taxable income up to $38,600, such a person would not pay any capital gains tax on the $35,000 in ordinary income and the first $3,600 of his or her gains, but the remaining $1,400 in gains would be taxed at the 15 percent rate. Statutory Tax Rate on Long-Term Capital Gains and Qualified Dividends (Percent)Ĭonsider, for example, a person filing singly in 2018 with taxable income of $40,000, of which $5,000 is long-term capital gains and $35,000 is ordinary income-that is, all income subject to the individual income tax from sources other than long-term capital gains and qualified dividends. Starting Points for Tax Brackets (2018 dollars) The brackets for 2018 are shown in the table below. (Tax brackets are ranges of total taxable income and vary depending on taxpayers' filing status.) Tax brackets are adjusted, or indexed, each year to include the effects of inflation. Generally, qualified dividends are paid by domestic corporations or certain foreign corporations (including, for example, foreign corporations whose stock is traded in one of the major securities markets in the United States).Īs specified by the tax code, different statutory tax rates apply to different portions of people's long-term capital gains and qualified dividends, depending on the tax brackets in which each portion lies. Since 2003, qualified dividends, which include most dividends, have been taxed at the same rates as long-term capital gains. Under current law, long-term capital gains (those realized on assets held for more than a year) are usually taxed at lower rates than other sources of income, such as wages and interest. Most taxable capital gains are realized from the sale of corporate stocks, other financial assets, real estate, and unincorporated businesses. When individuals sell an asset for more than the price at which they obtained it, they generally realize a capital gain that is subject to taxation. ![]()
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