capital gains tax

The 2022 Capital Gains Tax Rate Thresholds Are Out – What Rate Will You Pay?

Which tax rate applies to your 2022 long-term capital gains will depend on your taxable income.

If you sell stocks, mutual funds or other capital assets that you held for at least one year, any gain from the sale is taxed at either a 0%, 15% or 20% rate. Those tax rates for long-term capital gains are typically much lower than the ordinary tax rates you'd otherwise pay, which currently can be as high as 37%.

However, which one of those capital gains rates – 0%, 15% or 20% – applies to you depends on your taxable income. The higher your income, the higher the rate.

The taxable income thresholds for the capital gains tax rates are adjusted each year for inflation. The IRS has already released the 2022 thresholds (see table below), so you can start planning for 2022 capital asset sales now.

2022 Capital Gains Tax Rate Thresholds

Capital Gains
Tax Rate

Taxable Income
(Single)

Taxable Income
(Married Filing Separate)

Taxable Income
(Head of Household)

Taxable Income
(Married Filing Jointly)

0%

Up to $41,675

Up to $41,675

Up to $55,800

Up to $83,350

15%

$41,675 to $459,750

$41,675 to $258,600

$55,800 to $488,500

$83,350 to $517,200

20%

Over $459,750

Over $258,600

Over $488,500

Over $517,200

Tax on Net Investment Income

There's an additional 3.8% surtax on net investment income (NII) that you might have to pay on top of the capital gains tax. (NII includes, among other things, taxable interest, dividends, gains, passive rents, annuities and royalties.) You must pay the surtax if you're a single taxpayer with modified adjusted gross income over $200,000, a married couple filing a joint return with modified AGI over $250,000, or a married person filing a separate return with modified AGI over $125,000.

Note that, under the current version of President Biden's Build Back Better plan that's being considered by Congress, the surtax would be expanded beginning in 2022 to cover NII derived in the ordinary course of a trade or business for single or head-of-household filer with modified AGI over $400,000, a joint filer with modified AGI over $500,000, and a married person filing a separate return with a modified AGI over $250,000. The plan would also clarify that the surtax doesn't apply to wages on which Social Security and Medicare payroll taxes (i.e., FICA taxes) are already imposed.

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