Cap gains: Not just for the rich anymore

Comstock | Getty Images

Comstock | Getty Images

It’s no secret that the rich generate much of their wealth from relatively low-taxed capital gains. But data from the Internal Revenue Service show that other Americans saw increases in the share of their incomes coming from capital gains in 2013.

Capital gains are net income on sales of assets, like stocks or bonds, so they tend to do well in bull markets. Taxpayers who earned between $100,000 and $200,000 in adjusted gross income (AGI) for 2013 made five percent of their income in capital gains, up from 1.4 percent in 2012.

That’s the biggest jump for an income bracket over $20,000 and the only statistically significant increase. Five percent isn’t a ton, but with nearly 17,000 filers in the tax bracket, that makes up $685 million in additional income.

The fact remains that the richer a person is, the larger share of their income comes from capital gains. For the 12,319 returns filed by those who made more than $10 million in 2013, and thus qualified for the highest tax bracket, nearly 42 percent of AGI came from capital gains. That’s down from 49 percent in 2012, but still made up $142 billion.

Across income brackets, the share of capital gains decreased by two percentage points in 2013.

The maximum on capital gains tax for 2014 is 23.8 percent (a 20 percent tax rate plus a 3.8 percent Affordable Care Act investment tax). Under President Obama’s 2015 budget, the rate would increase to 24.2 percent.

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