US Capital Gains Tax

US capital gains tax or capital gains tax in US is levied by the Congress and collected by the Internal Revenue Service, which is an agency of the Executive Branch. In addition to the federal government imposing tax on capital gains in US, the state governments also have the power to impose these taxes on a state level. When a property is sold in America, then there is a possibility of gain from the transaction. Such gain from the sale of capital assets is known as capital gain, which is taxable. Capital losses are also as much of a reality; while capital gains are taxable, capital losses help in offsetting tax liabilities.

The rate of capital gains tax in USA varies and the different capital gains tax rates that are prevalent include 5%, 15%, 25% and 28%. The rate of taxation is lower in the case of long-term capital gains. These gains are made on sale of property held for a period in excess of a year. In order to calculate the capital gains tax in America, the total amount of the gains made should be calculated first. A cost basis rather than a simple purchase price is used in order to calculate the taxable gain amount.

The following are the exemptions from US capital gains tax:

• While selling real property that has been used by the owner as his primary residence for two of the last five years from the date of sale, the first $250,000 is exempt from taxation. The amount of exemption goes up to $500,000 for joint filings of married couples. Exemptions are also allowed in case of disabilities, military services, partial residences and other such reasons.
• If a corporation incurs both capital gains and capital losses in the same year, then the losses offset the gains while calculating tax-deductible gains.

The individuals can defer the US capital gains tax by making use of the tax planning strategies offered by the Internal Revenue Service (IRS). Such strategies include the following:

• Charitable Trust
• Structured Sale
• Installment Sale
• 1031 Exchange
• Private Annuity Trust