Long term capital gains are 20% if you're in the top tax bracket (making a little under $500k/yr) so I doubt you'll find many people being sympathetic there. It's 15% on long term gains for the majority of people.
Capital gains is added on top of regular income so if you had $450k regular income then $50k long term capital gains, $38,850 would be taxed at 15% and the remainder at the top rate of 20%
If your income + capital gains is less than $40,000 this year, your long term capital gains rate is 0%.
Go 1% over, and you pay 15% on the whole thing. It's really silly (and also not progressive; as the vast majority of America falls under the $40k to $440k bracket).
Really? Long-term capital gains tax rate at upper income levels is 20%. Most households have a lower effective income tax rate than that after accounting for all deductions.
No, long-term capital gains taxes are on different rates based on the same brackets as regular income tax; for the top income tax bracket, the long-term capital gains rate is 20%. For other income tax brackets from 25% up, the long-term capital gains rate is 15%. For the income tax brackets 15% and below, the long-term capital gains tax rate is 0%.
The combined long-term capital gains rate in places like California is >37%. The 20% is just the base federal rate, it can almost double when other investment taxes are accounted for.
You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways.
Top end, which kicks in at a bit shy of $520k is 37%. Top end Long-term Capital Gains max rate is 20% at about $440k. These are numbers for individuals, they differ for married couples and households filing collectively.
The long term capital gains rate is 0% if your income is $0 to $39,375; so essentially your first $40k of capital gains is exempt if you have no income.
For the purposes of this calculation, your cap gain is added to your income to work out your bracket.
For the 2020 tax year, you pay 0% on long-term capital gains if you have total income of $40,000 or less; 15% if you have income of $441,450 or less; and 20% if your income is greater than $441,450.
How do you get to your 15%? Long term capital gains in the US are taxed at 20% + 3.8% net income tax + state tax. In a city like New York, you're talking close to 40% depending on your tax bracket.
Capital gains varies a little depending on the asset (currencies, precious metals, real estate, etc have special rules), but generally it's 15% for long-term capital gains (1 year, not 2 years) and your regular income tax rate for short term capital gains.
It was recently raised to 20% for people in the highest income tax bracket. AMT of 28% may be used instead in certain circumstances.
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