{"id":2438,"date":"2010-08-15T12:12:34","date_gmt":"2012-10-18T16:15:26","guid":{"rendered":"\/5-myths-about-capital-gains-tax"},"modified":"2025-02-11T11:23:57","modified_gmt":"2025-02-11T19:23:57","slug":"5-myths-about-capital-gains-tax","status":"publish","type":"post","link":"https:\/\/www.irs.com\/en\/5-myths-about-capital-gains-tax\/","title":{"rendered":"5 Myths About Capital Gains Tax"},"content":{"rendered":"

If you believe any of the myths surrounding capital gains tax<\/a> and how it affects you, there is a good chance that you will include erroneous information on your income tax return<\/a>. This can lead to problems in the future, including a lower tax refund<\/a> or even an audit by the IRS. It is important to learn the facts regarding capital gains tax<\/a>, while also being aware of the myths that confuse many taxpayers. Below are 5 major myths concerning capital gains tax:<\/p>\n

MYTH #1: Short-term and long-term capital gains tax rates are the same. <\/strong> This is a myth that too many taxpayers believe. Unfortunately, it is anything but the truth. Short-term capital gains are taxed at your ordinary income tax rate. Long-term capital gains are taxed at no more than<\/em> 15% (for most taxpayers), based on your income level.<\/p>\n

MYTH #2: There is no such thing as a 0% capital gains tax. <\/strong> In 2008, the federal government introduced the 0% capital gains tax<\/a>. It gives low-income earners the chance to sell their capital assets without paying taxes on the profits. Those who are in the lowest 2 tax brackets<\/a> (the 10% and 15% brackets) are not<\/em> required to pay capital gains tax.<\/p>\n

MYTH #3:<\/strong> It is impossible to manage how much you pay in capital gains tax.<\/strong> While you definitely have to pay capital gains tax to the IRS, there are things you can do to keep your tax to a minimum. For instance, you can offset capital gains by deducting your capital losses (up to $3,000 per year if married filing jointly; up to $1,500 per year for married couples filing separately), which can help keep more money in your pocket. You may also choose to hold your assets for over a year, since the long-term capital gains tax rate<\/a> tends to be lower than the rate for short-term gains.<\/p>\n

MYTH #4:<\/strong> The way that short-term and long-term capital gains are calculated changes every year. <\/strong> It is difficult to say where this myth comes from, but it is one that many people believe. The truth is that a short-term capital gain stems from the sale (and profit) of an asset that was held for 1 year or less. A long-term capital gain occurs when you sell and profit from an asset that you owned for longer than a year.<\/p>\n

MYTH #5:<\/strong> You do not have to report capital gains every year.<\/strong> This is entirely false. Whether you have short-term or long-term capital gains, you need to report them to the IRS using Schedule D (Capital Gains and Losses) of Tax Form 1040<\/a> (U.S. Individual Income Tax Return). If you have deductible capital losses, they must also be reported on your return. There are many myths related to the capital gains tax ? the 5 listed above are very common and have confused many people over the years.<\/p>\n

Once you determine the facts versus the myths, you can begin to understand capital gains tax and how it affects you.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you believe any of the myths surrounding capital gains tax and how it affects you, there is a good chance that you will include erroneous information on your income tax return. This can lead to problems in the future, including a lower tax refund or even an audit by the IRS. It is important […]<\/p>\n","protected":false},"author":1,"featured_media":2439,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":["post-2438","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-capital-gains-tax"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/comments?post=2438"}],"version-history":[{"count":2,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2438\/revisions"}],"predecessor-version":[{"id":6464,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2438\/revisions\/6464"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/media\/2439"}],"wp:attachment":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/media?parent=2438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/categories?post=2438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/tags?post=2438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}