TAXING CAPITAL GAINS

Physician's Money Digest, April30 2003, Volume 10, Issue 8

Savvy physician-investors knowthat capital gains are taxed at alower rate than ordinary income,which is taxed according to theincome bracket you're in. If you'rein the 35% tax bracket, for instance,your ordinary income istaxed at that rate. Most taxpayersbelieve that there's a single capitalgains tax rate—20% on any assetyou hold for more than a year. Thatwould make things simple if it weretrue, but it isn't. A taxpayer in the10% or 15% tax bracket pays 10%on capital gains if the asset is heldfor a year, and only 8% if it's heldfor more than 5 years. For those inthe higher tax brackets, the tax is20%, but goes down to 18% onassets purchased after January 1,2001, and held for at least 5 years.