Capital gains tax rates and how to calculate what you owe for 2023

Capital gains, the profits reaped from selling assets like stocks, real estate, and investments, come under scrutiny when tax season arrives. Understanding the intricacies of capital gains tax rates is crucial for effective financial planning. Let’s delve into the details and explore strategies to navigate the tax landscape in 2023.

Capital Gains Tax Rates: Short-Term vs. Long-Term

  • Short-Term Capital Gains (Held for one year or less):
    • Taxed at ordinary income tax rates, reaching up to 37%.
    • Example: A single taxpayer with $10,000 short-term capital gains, earning $85,000 in wages, may face a tax bill of approximately $13,161.
  • Long-Term Capital Gains (Held for more than one year):
    • Taxed at preferential rates, ranging up to 20%.
    • Example: Converting the $10,000 gain into long-term, the tax bill reduces to about $12,614, resulting in $547 of tax savings.

Net Investment Income Tax (NIIT): An Additional Consideration

  • NIIT imposes a 3.8% tax on net investment income or the excess of modified adjusted gross income (MAGI) over set thresholds.
  • Thresholds for 2023: $200,000 (single), $250,000 (married filing jointly), $125,000 (married filing separately).

Strategies to Minimize Capital Gains Tax:

  • Hold Assets Long-Term:
    • Benefit from lower long-term capital gains rates.
  • Utilize Tax-Advantaged Accounts:
    • Invest in IRAs and 401(k)s for tax-deferred or tax-free growth.
  • Home Sale Exclusion:
    • Exclude up to $250,000 (single) or $500,000 (married) of home sale profits from taxable income.
  • Capital Losses Offsetting:
    • Offset gains with losses; excess losses can offset ordinary income.
  • Donate Appreciated Assets:
    • Donate stocks directly to charities to avoid capital gains taxes and receive a charitable deduction.

Navigating the complexities of capital gains tax requires strategic planning. Boa & Co is here to guide you through personalized financial strategies. Contact us at 1300 952 286 or email Visit us at Level 2, 7 Railway Street, North Tower, NSW 2067 Sydney, NSW, Australia 2067. Explore more at

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