How the U.S. tax system treat capital gains

The current tax rates for capital gains and dividends are as follows:

Capital gains:

• Short-term capital gains (assets held for one year or less) are taxed at the same rate as ordinary income.
• Long-term capital gains (assets held for more than one year) are taxed at a lower rate than ordinary income. The tax rate depends on the taxpayer's income bracket. For 2023, the long-term capital gains tax rates are:
  • 0% for taxpayers in the 10% and 12% tax brackets
  • 15% for taxpayers in the 22%, 24%, 32%, 35%, and 37% tax brackets
  • 20% for taxpayers in the 39.6% tax bracket

Dividends:

• Dividends are taxed as ordinary income. For 2023, the ordinary income tax rates are:
  • 10% for taxpayers in the 10% and 12% tax brackets
  • 22% for taxpayers in the 22% tax bracket
  • 24% for taxpayers in the 24% tax bracket
  • 32% for taxpayers in the 32% tax bracket
  • 35% for taxpayers in the 35% tax bracket
  • 37% for taxpayers in the 37% tax bracket
  • 39.6% for taxpayers in the 39.6% tax bracket

It is important to note that there are some exceptions to these general rules. For example, there is a qualified dividend tax rate for certain types of dividends. Additionally, there are special rules for capital gains and dividends that are earned by foreign investors and investors in pass-through entities such as partnerships and S corporations.

If you have any questions about how your capital gains and dividends will be taxed, you should consult with a tax advisor.

Capital gains and dividends are taxed differently in the United States.

Capital gains are the profits that investors make when they sell assets such as stocks, bonds, and real estate. Capital gains are taxed at a lower rate than ordinary income, and the tax rate depends on how long the investor held the asset before selling it.

Dividends are payments that companies make to their shareholders out of their profits. Dividends are taxed as ordinary income, which means that they are taxed at the same rate as other types of income, such as wages and salaries.