Question 1

What is the difference between short-term and long-term capital gains?

Accepted Answer

Short-term gains (assets held less than 1 year) are taxed as ordinary income at your marginal rate. Long-term gains (held over 1 year) get preferential rates of 0%, 15%, or 20% depending on income.

Question 2

Do I have to pay state capital gains tax?

Accepted Answer

Most US states tax capital gains as ordinary income. Some states like California tax them at rates up to 13.3%. Nine states have no income tax, including Texas and Florida.

Question 3

How are crypto gains taxed?

Accepted Answer

Cryptocurrency is treated as property by the IRS. Gains are subject to the same short-term/long-term rules as stocks. Each sale, trade, or use is a taxable event.

Question 4

Can I offset gains with losses?

Accepted Answer

Yes, you can use capital losses to offset gains. If losses exceed gains, you can deduct up to $3,000 against ordinary income annually. Excess losses carry forward.

Question 5

What is the Net Investment Income Tax (NIIT)?

Accepted Answer

The NIIT is an additional 3.8% tax on investment income for individuals with modified AGI above $200,000 ($250,000 for married filing jointly).

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