All kinds of incomes are taxable and in case of income from capital gain, it comes under the purview of the current Capital Gains Tax policies and rates in the United States. The policy behind the structure of current capital gains tax rate is to provide incentive to long term investors by charging them a lesser tax rate. Long term investment is the investment held for at least one year before its sale. Capital gains from short term investments are clubbed together with the other income of an individual or corporation and charged the income tax rate which is applicable to that income bracket, and hence will work out higher than a flat rate for long term investments.
The current Capital Gains Tax rules have a specific way of calculating the gain from the sale of an asset. In calculating taxable gain, the cost of the asset is arrived at, rather than taking the actual purchase price of the asset. This cost will include the purchase price plus any taxes or fees which are paid to acquire the asset. Fees can be for brokerage, selling, or legal expenses to name a few. Taxes can be excise, sales tax, tax on real estate and so on. Also depreciation of the asset is also taken into account while arriving at its cost during a sale.
As per current capital gains tax rates, the capital gains tax on long term investment is 15% for all individual income tax brackets except the lowest two. People coming under the lower income brackets of 10% and 15% need not pay any capital gains tax on long term investments. All the other income brackets are charged a standard 15%. This rate has been applicable since 2003 and is going to remain the same till 2010. From 2011 onwards the capital gains tax on the profit from long term investments is going to be 15% for the lowest income bracket of 10% and for all other brackets it will be 20%.
On collectibles that are held for more than a year, the current capital gains tax rate on the profit from their sale is 28%, and if held for a year or less the rates can go up to 35% as per STCG. In case of small business, current capital gains tax rate on sale of stock which has been held for more than five years is 28%.