When is the capital gains tax greater than 15%?

Question

Have you prepared your taxes yourself and seen your tax liability jump by more than 15% when entering your capital gains. My experience this year is that my net tax on cap gains is closer to 22%.

Answer 1

Look at the capital gains worksheet, that may explain what is going on.

Short-term capital gains are taxed as ordinary income. Capital gains on collectibles are taxed at 28%.

Only long-term capital gains get a favorable tax treatment with a maximum tax of 15%.

If the gains are large enough, you may disqualify yourself from other deductions and credits, and that may raise the incremental tax by more than 15% of the capital gain.

Answer 2

In general if you hold a stock for more than a year, then when you sell it any capital gains are taxed at 15%. Don't forget that you also have to pay state tax on those gains and different states have different rules about the tax rate on capital gains.
Also, the 15% rate only applies to certain income categories.

Answer 3

Your gains can cause a greater than 15% increase. Capital gains are included in adjusted gross income. Several deductions and credits are reduced in some or all cases if AGI goes up. For example, medical expenses are deductible to the extent they exceed 7.5% of AGI. Education deductions and credits are phased out at certain levels of AGI. There are more such items.

The tax calculation for the gains may be 15% but the side effects above make the effective rate higher.

Answer 4

Normally the long term CG rate is 15%. If your marginal rate is already 15% then it will be 5%. If your marginal rate is 28%, your long term CG rate will be 25%. If you have short term CGs, they are taxed at your marginal rate.