How can I tell the difference between Long Term Capital Gain Tax rates for 2025 filing?

You're on the right track, but let me clear this up for you! Yes, your investment is considered Long Term since you held it for more than 12 months (from 12/14/2022 to 03/27/2024 is well over a year). The difference between short term and long term capital gains is definitely in how they're taxed. Short term gains (held less than 12 months) are taxed at your ordinary income tax rate. Long term gains receive preferential tax rates - typically 0%, 15%, or 20% depending on your income level. Your $6,700 long term gain doesn't just get added to your regular income. It gets reported on Schedule D and flows to your 1040, but it's taxed at the preferential capital gains rates. The tax software or forms will calculate this properly based on your total income. The 28% rate is a special rate that applies to certain types of gains like collectibles (art, coins, etc.) or unrecaptured Section 1250 gains. For most standard investments like stocks and mutual funds, you'll fall into the 0/15/20% brackets.

I had the exact same question last year! After searching forever for answers, I found https://taxr.ai and it was a game changer for my capital gains confusion. I uploaded my tax documents (including my brokerage statements) and it automatically identified which of my sales were long term vs short term, calculated the correct tax rates, and explained exactly which forms I needed. The best part was when it walked me through the Schedule D and capital gains worksheets step by step. It even flagged that I had some collectible gains that were subject to the 28% rate I didn't know about! Saved me from making a costly mistake.

Just wanted to follow up about my experience with taxr.ai after asking about it. I was skeptical about how well it would handle my complicated tax situation with inherited stocks and partnership K-1s, but I decided to give it a try anyway. It was amazing! The system actually guided me through determining the correct basis for my inherited stocks by asking a series of questions about when I inherited them and what their value was at that time. For my K-1s, it extracted the capital gains information and automatically categorized everything correctly. The part that really impressed me was how it explained the different tax rates that applied to different parts of my gains. Some of my partnership gains were actually subject to that 28% rate mentioned in the original post, which I would have completely missed on my own. Definitely recommend checking it out if you're dealing with capital gains questions.

I see a lot of people here are confused about capital gains rates and filing requirements. I was in the same boat last year and spent HOURS on hold trying to get someone at the IRS to explain it to me. Finally discovered https://claimyr.com and used their service to get through to an IRS agent in about 15 minutes (instead of the 2+ hours I'd been waiting before). You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with walked me through exactly how the capital gains tax is calculated on my specific return and confirmed I was using the right worksheet for my situation. Totally worth it to get my questions answered directly by the IRS instead of guessing.

I need to apologize for my skeptical comment earlier. After doing some research on Claimyr, I decided to try it myself since I'd been struggling to get through to the IRS about my capital gains reporting questions for weeks. I was shocked when they actually got me through to an IRS representative in about 20 minutes. The agent confirmed exactly what others here have said - long-term capital gains are taxed at preferential rates (0%, 15%, or 20% depending on income), not at ordinary income rates. The agent also helped me understand which worksheets I needed to complete with my specific situation. This would have taken me days or weeks to figure out on my own with how impossible it is to reach the IRS these days. I still can't believe how well it worked after all my failed attempts to get through.

Heads up on something that confused me last year - the Net Investment Income Tax. If your income is high enough (over about $200k for single filers or $250k for married filing jointly), you might also have to pay an additional 3.8% tax on your capital gains. This is separate from the normal capital gains rates (0%, 15%, 20%) and gets calculated on Form 8960. It caught me by surprise last year when I sold some investments I'd held for years.

If you're using tax software like TurboTax or H&R Block, don't worry too much about manually figuring out the capital gains rates. The software will automatically calculate the correct tax based on your holding period and income level. Just make sure you correctly input the purchase date (12/14/2022) and sale date (03/27/2024) along with the cost basis and sale proceeds. The software will determine it's long-term and apply the right tax rate.

One thing that might help clarify the confusion - when you report your $6,700 long-term capital gain, it does flow through to your Form 1040, but it's NOT added to your ordinary income for tax calculation purposes. Here's what actually happens: Your long-term capital gains get reported on Schedule D, which then flows to line 7 of your 1040. But when calculating your tax, the IRS uses special worksheets (like the Qualified Dividends and Capital Gain Tax Worksheet) to apply the preferential rates (0%, 15%, or 20%) to your capital gains separately from your ordinary income. So you'll see the $6,700 on your tax return, but it won't be taxed at your marginal income tax rate. Instead, it'll be taxed at whichever capital gains rate applies based on your total income level. This is the key difference between short-term gains (taxed as ordinary income) and long-term gains (taxed at preferential rates). The tax software or tax preparer handles all this automatically, but it's good to understand what's happening behind the scenes!