Question 1

What is the capital gains tax rate?

Accepted Answer

Short-term (held under 1 year): taxed at ordinary income rates (10-37%). Long-term (held over 1 year): 0%, 15%, or 20% based on taxable income. 2024 LTCG brackets (single): 0% under $47,025, 15% under $518,900, 20% above. Married brackets: 0% under $94,050, 15% under $583,750, 20% above. NIIT adds 3.8% for high income (over $200K single, $250K married). State tax: most states tax gains as ordinary income.

Question 2

How to minimize capital gains tax?

Accepted Answer

Strategies: hold investments over 1 year for lower LTCG rates. Tax-loss harvesting: offset gains with losses, deduct up to $3,000 against ordinary income. Time gains: realize in years with low ordinary income to stay in 0% LTCG bracket. Use tax-advantaged accounts (401k, IRA) for active trading. Donate appreciated assets to charity (avoid gain, get deduction). Avoid wash sale rule: 30-day waiting period after selling for loss. Consider opportunity zones for deferred gains.

Question 3

What is tax-loss harvesting?

Accepted Answer

Sell losing investments to offset realized gains. Offset short-term gains first (higher tax rate). Up to $3,000 excess loss deductible against ordinary income per year. Remaining losses carry forward indefinitely. Wash sale rule: cannot repurchase same/similar security within 30 days before or after sale. Harvest at year-end or throughout year. Consider: transaction costs, future recovery, wash sale rule, portfolio allocation. Works best with volatile investments.

Question 4

Does capital gains count toward Social Security taxation?

Accepted Answer

Yes, capital gains count toward combined income for Social Security taxation. Combined income = AGI + tax-exempt interest + 50% of SS benefits. Capital gains increase combined income, potentially making more SS taxable (50% or 85% threshold). LTCG taxed separately at capital gains rates but affects SS taxation threshold. Strategy: use Roth withdrawals (not counted), time gains carefully, harvest losses to reduce AGI.

Question 5

What is the wash sale rule?

Accepted Answer

Wash sale rule: cannot claim loss if repurchase same or substantially identical security within 30 days before or after sale. Applies to: same stock/ETF, similar ETFs tracking same index, options on same stock. Does NOT apply to: different stocks in same sector, bonds, different ETFs tracking different indices. Loss disallowed: added to basis of repurchased shares, defers deduction until later sale. Applies across all accounts (IRA, 401k, taxable). Wait 31+ days to repurchase.

Capital Gains Tax Calculator

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