The taxes paid on capital gains can vary depending on the length of time the investment is held.
Short-Term capital gains: If assets are held for less than a year, they are considered short-term. Short term gains are taxed at the taxpayer’s ordinary tax rate.
Long-Term capital gains: If assets are held for more than one year, they are considered long-term. These gains are taxed depending on the taxpayer’s marginal tax bracket.
If you are in the 10% or 15% marginal tax bracket, then there is no capital gains tax. So, if there is a year you expect your income to be low that might be the time to sell some securities, pay no tax and re-invest.
If you are in the 25%, 28%, 33% or 35% marginal tax bracket, then there is a 15% capital gains tax.
The 39% marginal tax bracket results in a 20% capital gains tax. In addition, high-income earners are subject to a net investment income tax as discussed in the March blog.