President Biden’s FY2025 budget proposal seeks to significantly increase the top long-term capital gains tax rate to 44.6% for individuals with taxable income over $1 million. Including the 3.8% Net Investment Income Tax (NIIT), this top rate could reach 48.4% or higher, targeting wealthy individuals and aiming to align capital gains taxation closer to ordinary income rates.
The proposal introduces a graduated taxing structure, with further modifications to include an increase to a 44.6% capital gains rate. That's up from the current 20% capital gains tax rate from the 2017 Trump tax reform.
Long-Term Capital Gains tax rate is 12.5% and Short-Term Capital Gains tax rate is 20% or at slab rates as updated in Budget 2024. Profit on sale of capital assets such as land, building and stocks are subject to capital gains tax.
Changes to the Alternative Minimum Tax (AMT) took effect on January 1, 2024. If you are a high-income earner, you may be more susceptible to AMT if you realize capital gains now that the proposed inclusion rate increase to 66.67% from 50% is deferred until January 1, 2026.
For example, in 2025, a single filer won't pay any tax on long-term capital gains if their total taxable income is $48,350 or less. But an individual filer with income between $48,350 and $533,400 would pay a 15% long-term capital gains tax rate.
To avoid or reduce capital gains tax for 2025-26, hold investments over a year for lower long-term rates, use tax-advantaged accounts like IRAs/401(k)s/ISAs, offset gains with losses, donate appreciated assets to charity, use a primary residence exclusion, or consider strategies like 1031 exchanges for real estate. Spreading sales across tax years and gifting to a spouse are also effective methods to stay within annual allowances.
The "6-year rule" for Capital Gains Tax (CGT) in Australia allows you to treat a former main residence as tax-exempt for up to six years after you move out, even if you rent it out, enabling you to avoid CGT on any growth during that period. You qualify by moving out, choosing to treat it as your main home for tax, and can reset the rule by moving back in. If you rent it out for longer than six years, only the portion of the gain after the six-year mark becomes taxable.
For 2026 (returns normally filed in early 2027), the long-term capital gains tax rates remain at 0%, 15%, and 20%, but the income thresholds have shifted.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
To claim an exemption under Section 54, the taxpayer should purchase another house within one year before or two years after the date of transfer of the old house or should construct another house within three years from the date of transfer.
7-Year Capital Gains Tax Exemption
If you dispose of land or buildings bought between 7 December 2011 and 31 December 2014, and held them for at least 4 years, you may be eligible for partial or full relief: Held for more than 7 years: No CGT for the first 7 years of ownership.
However, after the amendments effective from 23 July 2024, the indexation benefit has been removed and the tax rate for long-term capital gains is now uniformly 12.5% for most assets. Investors must factor in these changes when trading shares, mutual funds or other capital assets to optimise their tax outcomes.
2025/26 tax year
The main rate of CGT is 18% for basic rate taxpayers. For higher or additional rate taxpayers, the rate is 24%. If you are normally a basic-rate taxpayer but when you add the gain to your taxable income you are pushed into the higher-rate band, then you will pay some CGT at both rates.
4 Strategies to Reduce or Lower Capital Gains Tax on Rental Properties
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
Capital gains tax rates
A capital gains rate of 0% applies if your taxable income is less than or equal to: $48,350 for single and married filing separately; $96,700 for married filing jointly and qualifying surviving spouse; and. $64,750 for head of household.
The "6-year rule" for Capital Gains Tax (CGT) in Australia allows you to treat a former main residence as tax-exempt for up to six years after you move out, even if you rent it out, enabling you to avoid CGT on any growth during that period. You qualify by moving out, choosing to treat it as your main home for tax, and can reset the rule by moving back in. If you rent it out for longer than six years, only the portion of the gain after the six-year mark becomes taxable.
Live in the house for at least 2 years
One of the most effective ways to avoid capital gains taxes is by meeting the ownership and use test. If you live in your home for at least 2 out of the 5 years before selling, you may qualify for the Section 121 exclusion.
If you become a permanent resident of another country then the capital gains on the sale of stocks which are personal property will be sourced to the residence of the seller.
The capital gains tax over 65 is a tax that applies to taxable capital gains realized by individuals over the age of 65. The tax rate starts at 0% for long-term capital gains on assets held for more than one year and 15% for short-term capital gains on assets held for less than one year.