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Understanding Capital Gains Taxes

Capital gains taxes are applied to the profits from the sale of assets such as stocks, bonds, or real estate. The rate at which these gains are taxed depends on whether they are considered short-term or long-term.

Type of Capital Gain	Definition	Tax Rates
Short-Term Capital Gains	Gains from the sale of assets held for one year or less.	Taxed as ordinary income, based on the taxpayer's tax bracket (10% to 37% for 2023).
Long-Term Capital Gains	Gains from the sale of assets held for more than one year.	0% for individuals with taxable income up to $41,675 ($83,350 for married filing jointly) 15% for individuals with taxable income between $41,676 and $459,750 ($83,351 and $517,200 for married filing jointly) 20% for individuals with taxable income over $459,750 ($517,200 for married filing jointly)

Combining and Offsetting Capital Gains and Losses

When you have multiple stock sales, you can combine and offset gains and losses to reduce your taxable income:

• Short-term gains and losses are netted against each other.
• Long-term gains and losses are netted against each other.
• If you have net losses in one category, they can be used to offset net gains in the other category.
• If your total net losses exceed your total net gains, you can deduct up to $3,000 ($1,500 if married filing separately) against other income.
• Any remaining losses can be carried forward to future tax years.

Dividends and Interest

Dividends and interest are typically considered ordinary income, not capital gains. However, qualified dividends may be taxed at the lower long-term capital gains tax rates.

Type of Income	Classification	Tax Treatment
Dividends	Ordinary or Qualified	Ordinary dividends are taxed as ordinary income. Qualified dividends are taxed at long-term capital gains rates.
Interest	Ordinary Income	Taxed as ordinary income at the taxpayer's regular tax rate.

Please consult with a tax professional for personalized advice and to ensure compliance with current tax laws and regulations.