Investment taxation
What you need to know about how your investments are taxed in your country: tax brackets, forms to file, loss compensation, and legal optimizations.
Tax authority: IRS
Capital gains tax brackets
Apply to capital gains (sale of funds, ETFs, stocks, crypto) and investment income.
| Bracket | Applicable rate |
|---|---|
| $0 – $47,025 | 0% |
| $47,025 – $518,900 | 15% |
| $518,900 – ∞ | 20% |
Key forms to file
Form 1040
Apr 15Federal income tax return. Includes Schedule D for capital gains.
Who must file? All citizens and residents with income above the filing threshold
Form 8949
Apr 15Sales and dispositions of capital assets. Each transaction with dates, cost basis, and proceeds.
Who must file? Anyone selling stocks, ETFs, crypto, or other capital assets
Form 1099-B / 1099-DIV
Feb 15 (issued)Broker-issued reports for asset sales (1099-B) and dividends (1099-DIV). Needed to prepare Form 8949.
Who must file? Issued by broker to taxpayer
FBAR (FinCEN 114)
Apr 15 (ext. Oct 15)Report of Foreign Bank and Financial Accounts if aggregate balance exceeds $10,000 at any point during the year.
Who must file? Persons with foreign financial accounts >$10,000
Loss compensation
- →Capital losses first offset capital gains of the same category (short-term vs long-term).
- →Net capital losses deduct up to $3,000/year from ordinary income ($1,500 if married filing separately).
- →Excess losses carry forward indefinitely.
- →Wash sale rule: if you repurchase a substantially identical asset within 30 days (before or after the sale), the loss is disallowed.
Legal optimizations
- ✓Long-term capital gains (>1 year): preferential rates of 0%, 15%, or 20% depending on income.
- ✓Tax loss harvesting: sell losers to offset gains, respecting the 30-day wash sale rule.
- ✓Tax-advantaged accounts: 401(k), IRA, Roth IRA allow deferring or eliminating taxes on gains.
- ✓Qualified dividends: taxed at preferential long-term capital gains rates if holding period met.
- ✓Step-up in basis: heirs receive assets with cost basis adjusted to fair market value at death.
Important warnings
- • The U.S. taxes citizens on worldwide income, even when living abroad.
- • State taxes vary widely: California up to 13.3%, Texas and Florida 0%.
- • The 3.8% Net Investment Income Tax (NIIT) applies to investment income above $200k/$250k.
- • Consult a CPA or Enrolled Agent for complex situations.