Capital Gain Taxation
The sale of financial assets in the US (stocks, bonds, trust funds, ETF, REIT, etc.) is subject to capital gains tax rates.
The US distinguishes between assets held for over one year and assets held for under one year.
This distinction determines the taxation rates applicable to the income.
Financial assets sold within a year or less are called short-term capital gains.
This income is included as part of the taxpayer’s income and taxed under marginal tax rates.
Financial assets sold after a year or more of possession are called long-term capital gains, and are taxed under beneficiary taxation rates, according to the taxpayer’s marginal tax rates.
The following table summarizes capital gains tax rates:
| Capital gains and dividends | Federal tax rate | Amount in $ US | ||
| Long-term | Short-term | Single taxpayer | From – | To – |
| 0% | 10% | 10% | 0 | 9,075 |
| 0% | 15% | 15% | 9,076 | 36,900 |
| 15% | 25% | 25% | 36,901 | 89,350 |
| 15% | 28% | 28% | 89,351 | 186,350 |
| 15% | 33% | 33% | 186,351 | 405,100 |
| 15% | 35% | 35% | 405,101 | 457,600 |
| 20% | 39.6% | 39.6% | 457,601 | indefinitely |
Capital losses can be offset by capital gains (regardless of the duration of possession).
The remainder will retain its nature.
For example, an individual with long-term capital gains of $10,000 and short-term capital losses of $5,000
will, after offset, be taxed according to beneficiary rates since the remainder will maintain its nature.
If there are no capital gains, $3,000 can be offset for every liable income.
Losses exceeding this amount will be accumulated for subsequent years and deducted in the same order.
Internal taxation laws and tax treaties determine that the US cannot tax foreigners for capital market gains.
These will be taxed by the country of origin.
US citizens residing outside the US are subject to a protection section that exceeds other treaty clauses and determines that the US may tax them as though the treaty is invalid.
Dividends Taxation
Dividends are taxed in the same method as capital gains but vary in tax rates.
A Qualified Dividend taxed under lower rates is determined according to the duration of stock possession.
at least 60 days prior to declaration – X-date and according to the location of incorporation – whether the company is American or not.
*There is an exception for dual companies traded in the US, as well as companies incorporated in countries that do not maintain a tax treaty with the US.