As someone who owns highly-appreciated property, you’re undoubtedly all too familiar with the capital gains rate structure. You’re likely also familiar with how much of a bite capital gains taxes can take out of your profits when you sell one of these properties.
You’ll be glad to know that, despite the numerous calls for tax increases that came out of Washington this year, nothing has yet changed in terms of the capital gains rate or the federal income tax brackets. Consequently, the long-term capital gains rates remain 0%, 15% and 20%, depending on the amount of income you earned this year and your filing status, and the short-term capital gains rates remain 10%, 12%, 22%, 24%, 32%. 35% and 37%, again depending on the amount of income you earned this year and your filing status.
2021 Long-Term Capital Gains Rate Applications
As you know, you pay long-term capital gains when you sell property you’ve held for one year or longer.
When you file your 2021 income tax return in April, 2022, the following long-term capital gains rates will apply if you’re a married taxpayer filing jointly:
- Taxable income of up to $80,800 – 0%
- Taxable income of $80,800 to $501,600 – 15%
- Taxable income of over $501,600 – 20%
2022 Long-Term Capital Gains Rate Applications
While the long-term capital gains tax rates remain the same for 2022 — at least so far — the income tax bracket thresholds will change. Therefore, when you file your 2022 income tax return in April, 2023, the following long-term capital gains rates will apply if you’re a married taxpayer filing jointly:
- Taxable income of up to $83,350 – 0%
- Taxable income of $83,350 to $517,200– 15%
- Taxable income of over $517,200– 20%
2021 Short-Term Capital Gains Rate Applications
As you also know, you pay short-term capital gains when you sell property you’ve held for less than one year.
When you file your 2021 income tax return in April, 2022, the following short-term capital gains rates will apply if you’re a married taxpayer filing jointly:
- Taxable income of up to $19,900 – 10%
- Taxable income of 19,900 to $81,050 – 12%
- Taxable income of $81,050 to $172,750 – 22%
- Taxable income of $172,750 to $329,850 – 24%
- Taxable income of $329,850 to $418,850 – 32%
- Taxable income of $418,850 to $628,300 – 35%
- Taxable income of over $628,300 – 37%
2022 Short-Term Capital Gains Rate Applications
As with the long-term capital gains, the 2022 short-term capital gains rates remain the same, but the income tax brackets to which they apply will increase. If you’re a married taxpayer filing jointly, your short-term capital gains rates will be as follows:
•Taxable income of up to $20,550 – 10%
•Taxable income of $20,550 to $83,550 – 12%
•Taxable income of $83,500 to $178,150 – 22%
•Taxable income of $178,150 to $340,100 – 24%
•Taxable income of $340,100 to $431,900 – 32%
•Taxable income of $431,900 to $647,850 – 35%
•Taxable income of over $647,850 – 37%
2022 Tax Planning Strategy
Regardless of which tax bracket you will fall into during 2022, and the consequent capital gains tax you’ll face paying when you sell one of your highly appreciated assets, don’t forget that the Deferred Sales Trust (DST) allows you to defer those taxes, plus gives you many additional benefits. Intrigued? Contact Reef Point today for more information.