Tax Law Changes 2018, 5 of 10

Capital gains taxes

The general structure of the capital gains tax system, which applies to things like stock sales and sales of other appreciated assets, isn't changing. However, there are still a few important points to know.

For starters, short-term capital gains are still taxed as ordinary income. Since the tax brackets applied to ordinary income have changed significantly, as you can see from the charts above, your short-term gains are likely taxed at a different rate than they formerly were.

Also, under the new tax law, the three capital gains income thresholds don't match up perfectly with the tax brackets. Under previous tax law, a 0% long-term capital gains tax rate applied to individuals in the two lowest marginal tax brackets, a 15% rate applied to the next four, and a 20% capital gains tax rate applied to the top tax bracket.

Instead of this type of structure, the long-term capital gains tax rate income thresholds are similar to where they would have been under the old tax law. For 2018, they are applied to maximum taxable income levels as follows:

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Finally, the 3.8% net investment income tax that applied to high earners stays the same, with identical income thresholds. If Congress is successful in repealing the Affordable Care Act, this could potentially go away, but it remains for the time being.