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The 2022 Capital Gains Rates Are Better Than Ever – Tulsa World

Selling stocks for a profit can be a major victory for your bank account. But it can also come with a hefty tax bill if you aren’t careful. The IRS isn’t going to let you slide by without paying capital gains taxes.

Fortunately, patient investors get rewarded in the stock market with special rates. For 2022, those rates are better than ever, thanks to the increased thresholds set by the IRS. We’ll explain how you can get a deal on your tax bill with the new capital gains benefits.

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Exclusive perks for investors

When you become an investor, you enter an exclusive club of individuals who have the power to earn more money while paying less taxes. That’s all because of capital gains rates. These rates can be lower than the ordinary income tax rates that you pay from a job and can help you keep more of your profits.

Capital gains rates come in two flavors: short-term and long-term. When you invest in a taxable brokerage account, you’ll have to pay one of these taxes, depending on how long you’ve held your investment.

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Let’s say you’re anxious to cash in on a winning investment. You sell the stock six months after you purchase it. Because you held the stock for a year or less, you’ll be stuck with the short-term capital gains rates. Those tax rates mirror the rates you pay when you earn money at a job. There’s nothing exciting about those rates.

Here’s a peek at the 2022 short-term capital gains rates for those who break up with their stocks early:

Rate

Single

Married Filing Jointly

Head of Household

10%

$0 to $10,275

$0 to $20,550

Up to $14,650

12%

$10,276 to $41,775

$20,551 to $83,550

$14,651 to $55,900

22%

$41,776 to $89,075

$83,551 to $178,150

$55,901 to $89,050

24%

$89,076 to $170,050

$178,151 to $340,100

$89,051 to $170,050

32%

$170,051 to $215,950

$340,101 to $431,900

$170,051 to $215,950

35%

$215,941 to $539,900

$431,901 to $647,850

$215,951 to $539,900

37%

Over $539,900

Over $647,850

Over $539,900

Table source: Author. Data Source: IRS.

This is the real tax deal

The long-term capital gains rates are the true prize for investors. You can drastically drop your tax bill after holding your investments for over a year. Long-term investors unlock the 0%, 15%, and 20% capital gains rates. The IRS expanded the income range for each tax bracket so you’ll be able to make a bit more money before your income tips into the next bracket.

Most people will fall into the 15% tax bracket. For those who have a lower taxable income this year, you could bypass taxes altogether. There’s a 0% tax bracket for single filers who have taxable income under $41,676. You can sweeten the pot if you’re filing as a married couple. You and your spouse can earn up to $83,350 before you have to pay taxes on your long-term gains.

Let’s say a couple’s total taxable income from working a job and capital gains is $83,000. The couple could pay 0% on profits for stocks held over a year if they are married filing jointly.

Here are the 2022 and 2021 capital gains rates:

2022 long-term capital gains tax brackets

For single filers with taxable income of…

For married joint filers with taxable income of…

For heads of households with taxable income of…

…this is the long-term capital gains rate

$0 to $41,675

$0 to $83,350

$0 to $55,800

0%

$41,676 to $459,750

$83,351 to $517,200

$55,801 to $488,500

15%

Over $459,750

Over $517,200

Over $488,500

20%

Table source: Author. Data Source: IRS.

2021 long-term capital gains tax brackets

For single filers with taxable income of…

For married joint filers with taxable income of…

For heads of households with taxable income of…

…this is the long-term capital gains rate

$0 to $40,400

$0 to $80,800

$0 to $54,100

0%

$40,401 to $445,850

$80,801 to $501,600

$54,101 to $473,750

15%

Over $445,851

Over $501,601

Over $473,751

20%

Table source: Author. Data Source: IRS.

Patient investors keep more profits

Although seeing profits in your account can be rewarding, it can come with a high tax bill if you’re not careful. If you can hang on to your stocks over a year, your tax bill will be much lower. However, if you focus on investing in high-quality assets that align with your goals, selling your stocks — unless you need the funds — probably won’t be top of mind.

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