Capital gains tax is a tax on income received from the sale of an asset—such as a business, real estate, your home, stocks, bonds, coin collections, and jewelry. Capital gains tax is paid on the financial gain between the amount you paid for (or invested to build) the asset, and the amount for which it is sold.
The rate (percentage) paid as capital gains tax has traditionally been lower than the rate (percentage) paid on income tax. And the Internal Revenue Service (IRS) has traditionally taxed long term gains differently than short term gains—with the distinction based on how long the taxpayer owned or held the asset.
In Florida, there is no state-level capital gains tax; residents only pay the federal capital gains tax on the sale of assets such as businesses, real estate, stocks, and other investments. The federal capital gains tax rates vary depending on the taxpayer's income level and the duration for which the asset was held. Long-term capital gains, which apply to assets held for more than one year, are taxed at lower rates than short-term capital gains, which apply to assets held for one year or less. The long-term capital gains tax rates are 0%, 15%, or 20%, depending on the taxpayer's income, while short-term gains are taxed at the individual's ordinary income tax rate. It's important to consult with an attorney or tax advisor for specific advice on how to report and pay capital gains tax, as there may be additional considerations such as the net investment income tax or potential deductions that could affect the amount owed.
