2023 Long-Term Capital Gains Tax Brackets

Are you wondering how capital gains taxes work? Whether you're buying or selling assets like stocks, real estate, or cryptocurrencies, you could be subject to capital gains tax. Simply put, it's a tax on the profit you make when you sell an asset for more than you paid for it. How much tax you'll owe depends on your income level and how long you owned the asset.

In this blog, we'll focus on the long-term capital gains tax brackets for 2023. Understanding the different tax brackets can help you make more informed decisions about when to sell an asset and how to manage your tax liability.

What Are Capital Gains?

Capital gains refer to the profit you earn when you sell an asset for more than what you paid for it. This includes stocks, bonds, real estate, or art, among others. You only realize capital gains when you sell the asset. Any increase in value while you still own it is an unrealized gain, and you don't have to pay taxes on it until you sell the asset. Plus, any loss on the sale of capital assets can offset gains and reduce your overall tax liability.

How Are Capital Gains Taxed?

The tax rate for capital gains depends on factors like the type of asset, how long you held it, and your income level. Long-term capital gains tax brackets are particularly crucial because they determine the tax rate you'll pay on gains from assets you've held for over a year. Knowing these brackets can help you make informed financial decisions and manage your tax liability.

Long-Term Capital Gains Rates in 2023

The long-term capital gains tax rates for 2023 depend on your taxable income and filing status. Taxpayers will pay 0%, 15%, or 20% on their gains, with the lowest rate applying to those with the lowest income.

For 2023, the zero percent capital gains rate applies to single tax filers with an income of $44,625 or less. Most single people with investments will fall into the 15% capital gains rate, which applies to incomes between $44,625 and $492,300. The 15% rate also applies to married taxpayers filing separately with an income between $44,625 and $276,900, and married couples filing jointly with an income between $89,251 and $553,850.

Short-Term Capital Gains Rates in 2023

Short-term capital gains in the US are taxed as ordinary income, meaning that the rate could be as high as 37%, depending on your federal income tax bracket.

Now that you understand the long-term capital gains tax brackets for 2023, you can make informed financial decisions to manage your tax liability. Happy investing!