Max capital gains rates

What is it?

The Max capital gains rate refers to the highest tax rate applied to capital gains from the sale of investments.

This rate is categorized into short-term and long-term capital gains:

• Max short-term (ST) capital gains are realized from the sale of investments held for one year or less and are typically taxed at ordinary income tax rates.
• Max long-term (LT) capital gains are realized from the sale of investments held for more than one year and are taxed at preferential rates that are usually lower than ordinary income rates.

Why is it important?

• Tax planning – understanding capital gains tax rates helps investors make informed decisions about when to sell their investments to minimize taxes.
• Investment strategy – the tax implications of short-term vs. long-term gains can influence an investor's decision to hold or sell assets.
• Investment returns – the tax treatment of capital gains can affect the net returns an investor receives from their investments.