Capital Gain Tax in US, after 2010

In the United States, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. Capital gains are generally taxed at a preferential rate in comparison to ordinary income. This is intended to provide incentives for investors to make capital investments and to fund entrepreneurial activity. The amount an investor is taxed depends on both his or her tax bracket, and the amount of time the investment was held before being sold. Short-term capital gains are taxed at the investor's ordinary income tax rate, and are defined as investments held for a year or less before being sold. Long-term capital gains, which apply to assets held for more than one year, are taxed at a lower rate than short-term gains. In 2003, this rate was reduced to 15%, and to 5% for individuals in the lowest two income tax brackets. These reduced tax rates were passed with a sunset provision and are effective through 2010; if they are not extended before that time, they will expire and revert to the rates in effect before 2003, which were generally 20%.

The reduced 15% tax rate on qualified dividends and long term capital gains, previously scheduled to expire in 2008, was extended through 2010 as a result of the Tax Reconciliation Act signed into law by President George W. Bush on May 17, 2006. As a result:

• In 2008, 2009, and 2010, the tax rate on qualified dividends and long term capital gains is 0% for those in the 10% and 15% income tax brackets.
  
• After 2010, dividends will be taxed at the taxpayer's ordinary income tax rate, regardless of his or her tax bracket.
  
• After 2010, the long-term capital gains tax rate will be 20% (10% for taxpayers in the 15% tax bracket).
  
• After 2010, the qualified five-year 18% capital gains rate (8% for taxpayers in the 15% tax bracket) will be reinstated.
  

Capital Gains Taxation in the United States from 2003 forward[1]
2003 - 2010					2011 -
	2003 - 2007		2008 - 2010		2011 -
Ordinary Income Tax Rate	Short-term Capital Gains Tax Rate	Long-term Capital Gains Tax Rate	Short-term Capital Gains Tax Rate	Long-term Capital Gains Tax Rate	Ordinary Income Tax Rate	Short-term Capital Gains Tax Rate	Long-term Capital Gains Tax Rate
10%	10%	5%	10%	0%	15%	15%	10%
15%	15%	5%	15%	0%	28%	28%	20%
25%	25%	15%	25%	15%	31%	31%	20%
28%	28%	15%	28%	15%	36%	36%	20%
33%	33%	15%	33%	15%	39.6%	39.6%	20%
35%	35%	15%	35%	15%

When the taxable gain or loss resulting from the sale of an asset is calculated, its cost basis is used rather than its actual purchase price. The cost basis is an adjustment of the purchase price that takes into account factors such as fees paid (brokerage fees, certain legal fees, sales fees), taxes paid (including sales tax, excise taxes, real estate taxes, etc.), and depreciation.

The United States is unlike other countries in that its citizens are subject to U.S. tax regardless of where in the world they reside. U.S. citizens therefore find it difficult to take advantage of personal tax havens. Although there are some offshore bank accounts that advertise^[who?] as tax havens, U.S. law requires reporting of income from those accounts and failure to do so constitutes tax evasion.