Q:

What is the California capital gains tax rate?

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Quick Answer

As of 2014, the capital gains tax rate for California income taxes is 10.3 percent for individuals who make between $254,250 and $305,100 per year, according to Robert W. Wood for Forbes. The rate goes up to 13.3 percent for people who make $1 million or more annually.

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Full Answer

California has the highest marginal capital gains tax rate in the United States at 33 percent. This combined figure takes into account the federal capital gains tax rate, deductions for federal income taxes and a lack of itemized deductions, notes Kyle Pomerleau and Richard Borean for the Tax Foundation. The average marginal capital gains tax rate for all 50 states is 28.7 percent, as of February 2014. California has the highest state capital gains tax rate in the United States among all 50 states.

The capital gains tax rate encourages people to save less and invest less, and higher capital gains taxes have negative impacts on the long-term economy, explains Wood. Residents of California have the second-highest capital gains tax in the world, behind only Denmark at 42 percent. France is third at 32.5 percent and Finland places fourth at 32 percent.

A capital gain occurs when someone sells an asset for a more expensive price than when he bought the asset, according to the IRS. For example, a person who buys a diamond for $1,000 and then sells it for $1,500, pays a capital gains tax on $500.

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Related Questions

  • Q:

    How do you avoid capital gains tax?

    A:

    Avoid capital gains taxes, or lower your capital gains tax liability, by claiming losses, deducting contributions to a health savings account, selling a residence, renovating a home and contributing to retirement funds, according to David John Marotta for Forbes. The business magazine lists 14 specific tax loopholes to avoid capital gains taxes.

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  • Q:

    What is a tax table for long-term capital gains rates?

    A:

    A tax table for long-term capital gains rate is a table dictating the tax rates applicable to the sale or disposition of capital assets held for a year or more, according to the Internal Revenue Service. New tables are often issued yearly as tax rates change.

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  • Q:

    How do you estimate capital gains tax?

    A:

    To estimate capital gains, subtract the basis from the selling price of a capital asset, then apply the appropriate capital gains tax rate, explains the Houston Chronicle. Capital gains tax rates change annually, and current rates are available on the official website of the Internal Revenue Service.

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  • Q:

    What form do you use for capital gains tax?

    A:

    Capital gains as well as capital deductible loses are reported on Schedule D of Form 1040. All types of capital gains are taxed, but only some capital losses are deductible.

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