3 Ways to Decrease Capital Gains Tax
Taxes. No one likes to pay them. Unfortunately, that old adage about death and taxes rings as true today as it ever has. Investment income is not spared either, but there are ways to decrease these taxes, or stop them from hindering the growth of your wealth through time.
The easiest way to cut down your annual taxes on investments is to hold them for more than a year. Short-term capital gains taxes are taxed as ordinary income. Long-term capital gains tax creates an incentive for long-term investors. To qualify for these lower rates, you must hold your investment for over a year.
The three rates for capital gains are 0%, 15%, and 20%. For a single filer, you can pay 0% on long-term capital gains if your income is less than $40,000. While most people pay 15%, filers that had income of over $441,500 actually pay 20% capital gains tax on long-term gains. Filing jointly creates a 0% tax for incomes of $80,000 and below. Above that, there is a 15% tax all the way to $496,600. Above that income, the 20% tax applies.
Source Fool.com
