The Tax Cuts and Jobs Act has kept in place the favorable capital gains tax rates.

Current Law

Through December 31, 2017

Net capital gain for a non-corporate taxpayer (individual, estate, or trust) is taxed at maximum rates of 0%, 15%, or 20%. 0% capital gains rate is applied to capital gains that otherwise would be taxed at the marginal tax rate of 10% or 15%. The 15% capital gains rate is applied to capital gains that otherwise would be taxed above the 15% marginal tax rate but below the 39.6% marginal tax rate. The 20% capital gains rate is applied to capital gains that otherwise would be taxed at the 39.6% marginal tax rate.

New Law

Effective for tax years beginning after December 31, 2017, and before January 1, 2026

The 0% capital gains rate will apply to adjusted net capital gain that’s below the “maximum zero rate amount.” This amount is $77,200 for joint returns or surviving spouses, $51,700 for head of household, and $38,600 for single or married filing separate. The 15% capital gains rate will apply to adjusted net capital gain that exceeds the amount subject to the 0% rate and that is below the “maximum 15% rate amount.” This amount is:

  • $479,000 for joint returns or surviving spouses
  • $452,400 for head of household
  • $425,800 for single
  • $239,500 for married filing separate

The 20% capital gains rate is applied to adjusted net capital gain over the “maximum 15% rate amount” for each filing status.

Commentary

The maximum rate amounts are levels of taxable income in determining which capital gain rate will apply. The 3.8% Net Investment Income Tax and the 0.9% Additional Medicare Tax have not been repealed as part of this tax bill.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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