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U.S. Federal Personal Income Tax Rates—2013
Notes
Taxation of capital gains
• Capital gains are taxed at a maximum tax rate of 20% for net long-term capital gains,
which applies to the sale of assets held for more than 12 months. This 20% rate, which
came into effect in 2013, applies to individuals taxed in the 39.6% tax bracket. A lower rate
of 0% applies to net long-term capital gains that would otherwise be taxed in the 10% or
15% tax brackets and a rate of 15% applies to net long-term capital gains which would
otherwise be taxed in the 25% tax bracket.
• Gains from collectibles such as art, rugs or coins are not eligible for the reduced rates, and
neither are gains from the sale of qualified small business stock and of investment real
estate to the extent of depreciation previously claimed.
• Special rules also apply to sales of principal residences. Individuals are generally permitted
to exclude from taxable income up to $250,000 of gain ($500,000 for married individuals
filing joint returns) realized on the sale or exchange of a residence provided it was owned
and occupied as a principal residence for at least two years out of the five years prior to
the sale or exchange. Only one sale in any two-year period qualifies for the exclusion.
Taxation of dividends
• Qualified dividends are taxed as net capital gains at the rates outlined above. Dividends
which are not eligible for the capital gains rates are taxed as ordinary income.
• Dividends are eligible for these reduced tax rates if, in general, the shares are held for at
least 60 days.
• In general, dividends received from domestic and certain foreign corporations are eligible
for the reduced rates. Those received from foreign holding companies and foreign
investment companies are specifically excluded.
Net Investment Income Tax
• Certain net investment income in excess of specific threshold amounts is subject to tax
at 3.8% effective January 1, 2013. In general, Net Investment Income includes, but is not
limited to, interest, dividends, capital gains, and rental and royalty income.
• The Net Investment Income Tax (NIIT) does not apply to any capital gain recognized on the
sale of a principal residence that is exempt from tax (see Taxation of capital gains above).
• The thresholds amounts with respect to the NIIT are as follows:
Filing Status
Threshold Amount
Single taxpayers
$250,000
Married individuals filings joint returns
125,000
Married individuals filing separate returns
200,000
Head of households
200,000
Current as of June 30, 2013
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