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Random Term
Capital gain (and loss)

Profit (or loss) from the sale of a capital asset, such as stock received at a distribution from a nonqualified deferred compensation plan or from restricted stock units with deferral of share delivery. Capital gains may be short-term (held 12 months or less) or long-term (held more than 12 months).

You must file IRS Form 8949 and Schedule D with your federal IRS Form 1040 tax return for any tax year in which you sold stock, regardless of whether or not you have a capital gain. Capital losses can be used to offset capital gains to establish a net position for tax purposes. Only $3,000 of net capital losses can be deducted in any one year, with the remaining balance carried over to future years indefinitely.

The top rate of tax on long-term capital gain depends on your yearly taxable income:

  • The top tax rate on long-term capital gain 20%. For 2017, the 20% capital gains rate is tied to the highest income tax bracket and therefore applies to single filers with yearly taxable income of more than $418,400 and to married joint filers with yearly taxable income of more than $470,700. In 2018, under the Tax Cuts & Jobs Act (TCJA), the threshold is $425,800 for single taxpayers and $479,000 for married joint filers. Those thresholds are no longer tied to the highest income tax bracket.
  • For most taxpayers with less yearly taxable income, the capital gains rate is 15%.
  • For people in the 10% or 15% bracket for regular-tax purposes, the capital gains rate is 0%.

Short-term capital gain is taxed at the rates of wages and other ordinary income.