We follow a simple mantra here at Nomad Capitalist: “go where you’re treated best”. If you’re an American investor, it’s clear that that place is not the United States.
When it comes to the world’s highest capital gains taxes, The Land of the Free leads the list. Out of the top ten tax rates, only three countries place; the rest are US states.
In fact, when you average all US state capital gains tax rates together, you get 27.9% — a number some 60% higher than the average capital gains taxes paid by residents of all OECD countries. And OECD countries have some of the highest capital gains tax rates compared to the rest of the world.
The bottom line is that investing in the United States is an expensive proposition. However, several other western countries are quite costly for investors, as well. Here are the US states and countries with the highest capital gains taxes in the world:
5. New York, United States – 31.4%
When you’re not busy buying two sodas to get around New York City’s ridiculous soda ban, you’ll be paying some of the highest capital gains tax rates in the world. Even if you live in Buffalo, rather than Manhattan, you’re screwed.
In addition to paying federal, state, and city income taxes that quite often exceed 50% (even 60% if you’re self-employed), you have the privilege of paying a third of any capital gains you earn with the scraps left over.
If you live in New York City, taxes are even higher. If you’re ever looking to move (something I advise serious investors to consider), there are plenty of cities just as dynamic as the Big Apple — like Hong Kong — that have no capital gains taxes. And better weather.
4. Finland – 32%
Capital gains taxes in Finland increased slightly from their 2011 levels to today’s rates of 30% and 32% based on the realized income (gains of 50,000 euros and higher are taxed at the higher rate).
You can become exempt from tax on gains from the sale of real estate, but only if you’ve lived in the property for at least two years.
Considering neighboring Estonia offers corporations that only tax owners on distributions, Finland is a lackluster place for investors.
3. France – 32.5%
Ah, France… the socialist country with a President that wanted income tax rates on millionaires of 75% (and, in practice, 100%). And France is no slouch when it comes to high capital gains tax rates, either.
Short-term capital gains taxes are particularly painful, as they are subject to the standard 45% tax, plus a 15.5% social contribution. That means investors can pay in excess of 60% on short-term capital gains. Exemptions can back out part of that tax, namely on investments held for two years or longer.
Non-residents of France still owe capital gains taxes on any property appreciation they earn from real estate holdings but are exempt from the social contribution.
That said, most property investors will require a “tax representative” when selling their holdings. Endless bureaucracy in France makes it one of the worst places on earth for investors.
2. California, United States – 33%
I’m always fascinated to see Chinese investors flocking to buy homes in Southern California. While Chinese real estate is no doubt in the midst of a big bubble, California is hardly a safe haven for cash.
Many economists suggest that the state’s languishing economy is due to its high capital gains taxes. After all, why should investors take risks in California when the state’s high income and capital gains taxes will eat up much of their profits? California also has the USA’s highest tax on dividends, eating up as much as 70-some percent of income.
1. Denmark – 42% to 59%
If there was one country that could beat out the high tax rates in The Land of the Free, Denmark would be a top choice. The Scandinavian nation taxes capital gains at a lesser 27% on the first $9,000 or so in profits, then raises the rate to 42% on everything after that.
Interest income on bank deposits and other income, including real estate gains, is taxed even higher — as much as 59% at top tax rates.As in the US, you can earn a limited amount of capital gains income from the sale of your personal residence.
How do you avoid high capital gains taxes? For one, offshore structures can help many people mitigate the impact of high taxes on trading and other investment income subject to capital gains tax.
When it comes to capital gains taxes, Americans living on US soil are at a particular disadvantage. If you’re an investor earning serious returns, consider becoming an expat and living overseas in a more favorable jurisdiction. Investors from Jim Rogers on down have moved to places like Singapore for that exact reason.
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Denmark levies the highest top capital gains tax of all countries covered, at a rate of 42 percent. Norway levies the second-highest top capital gains tax at 35.2 percent. Finland and France follow, at 34 percent each.
Denmark levies the highest top capital gains tax of all countries covered, at a rate of 42 percent. Norway levies the second-highest top capital gains tax at 35.2 percent. Finland and France follow, at 34 percent each.
The Bottom Line. The IRS allows no specific tax exemptions for senior citizens, either when it comes to income or capital gains. The closest you can come is a back-end tax-advantaged retirement account like a Roth IRA which allows you to withdraw money without paying taxes.
U.S. citizens who become bona fide residents of Puerto Rico can maintain their U.S. citizenship, avoid U.S. federal income tax on capital gains, including U.S.-source capital gains, and avoid paying any income tax on interest and dividends from Puerto Rican sources.
The Florida income tax code piggybacks the federal income tax code for treatment of capital gains of corporations. The State of Florida does not have an income tax for individuals, and therefore, no capital gains tax for individuals.
Not all countries impose a capital gains tax and most have different rates of taxation for individuals compared to corporations. Countries that do not impose a capital gains tax include Bahrain, Barbados, Belize, Cayman Islands, Isle of Man, Jamaica, New Zealand, Sri Lanka, Singapore, and others.
Here's how it works: Taxpayers can claim a full capital gains tax exemption for their principal place of residence (PPOR). They also can claim this exemption for up to six years if they moved out of their PPOR and then rented it out.
Key Takeaways. You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly.
The exemption is a lifetime cumulative exemption. This means that you can claim any part of it at any time in your life if you dispose of qualifying property. You do not have to claim the entire amount at once.
The states with no additional state tax on capital gains are: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. These are the same states that do not tax personal income on wages, although they might tax interest and dividends from investments, depending on the state.
Unfortunately, there are no states without a property tax. Property taxes remain a significant contributor to overall state income. Tax funds are used to operate and maintain essential government services like law enforcement, infrastructure, education, transportation, parks, water and sewer service improvements.
Certain property tax benefits are available to persons 65 or older in Florida. Eligibility for property tax exemptions depends on certain requirements. Information is available from the property appraiser's office in the county where the applicant owns a homestead or other property.
If the home you sell was in your name and was your primary residence for the two out of five years, you may not have to pay taxes on the full amount of your profits. It's called the “2 out of 5 year rule.” It lets you exclude capital gains up to $250,000 (up to $500,000 if filing jointly).
How Long Do I Have to Buy Another House to Avoid Capital Gains? You might be able to defer capital gains by buying another home. As long as you sell your first investment property and apply your profits to the purchase of a new investment property within 180 days, you can defer taxes.
Overall, Canada is more affordable than the US, but the US has a higher median income. Comparing the cost of living in both countries is tricky because living costs vary dramatically within each city. It's important to consider the hidden costs and savings of public goods and services when comparing costs of living.
While the USA offers better salary packages, Canada has better healthcare, more maternity leaves and other social benefits. Average work hours for Canada is slightly higher than that of the US. The annual leave structure of both countries is similar.
The three biggest virtues the Canadian society offers its new immigrants are – an excellent public health care system, high quality of living, and the lowest crime rates. These reasons make Canada your first choice.
From 1954 to 1967, the maximum capital gains tax rate was 25%. Capital gains tax rates were significantly increased in the 1969 and 1976 Tax Reform Acts. In 1978, Congress eliminated the minimum tax on excluded gains and increased the exclusion to 60%, reducing the maximum rate to 28%.
Estonia and Latvia are the only European countries covered that do not levy a tax on dividend income. This is due to their cash-flow-based corporate tax system. Instead of levying a dividend tax, Estonia and Latvia impose a corporate income tax of 20 percent when a business distributes its profits to shareholders.
the USA ones may look unreasonable. In contrast to the US combined rate of 15.3%, European rates range between 13.97% (not including medical insurance and pension contributions) in Switzerland and a whopping 65-68% in France, based on the 2022 table by Trading Economics. Speaking about European taxes vs.
Key Takeaways. The U.S. has some of the lowest taxes in the world, both in terms of personal income tax rates and goods and services tax rates (sales taxes). U.S. taxes represent about one-quarter of gross national product, compared to an average of 33% in other OECD countries.
Among the countries with the lowest tax rates in the world are Malta, Cyprus, Andorra, Montenegro and Singapore. Aside from zero income tax, in Antigua and Barbuda, individuals are also free from paying taxes on wealth, capital gains, and inheritance.
You can reduce any amount of taxable capital gains as long as you have gross losses to offset them. For example, if you have a $20,000 loss and a $16,000 gain, you can claim the maximum deduction of $3,000 on this year's taxes, and the remaining $1,000 loss in a future year.
To avoid paying capital gains taxes (and any depreciation recapture), you can reinvest in a "like-kind" asset with a sales price of at least $500,000. The IRS allows virtually any commercial real estate property to qualify as 'like-kind” as long as you hold it for investment purposes.
Capital gains realized in California are taxed as ordinary income regardless of how long the asset was held. So moving to another state to avoid this tax after selling a large amount of stock or receiving a significant trust distribution may result in a residency audit and a capital gains tax liability.
1. Alaska. Alaska is the most tax-friendly state for retirees because it has no state income tax or tax on Social Security. And its sales tax rate is the fourth lowest on our list - fifth lowest in the U.S. But keep this in mind: The cost of living in Alaska is higher than in most states.
Florida primarily makes up for its lack of an income tax with its sales tax, which generates around 80% of the state's revenue. Florida's sales tax is imposed on services and goods, and both the state and county levy a certain percentage.
The Texas Constitution forbids personal income taxes. Instead of collecting income taxes, Texas relies on high sales and use taxes. When paired with local taxes, total sales taxes in some jurisdictions are as high as 8.25%. Property tax rates in Texas are also high.
Long-term capital gains tax rates for the 2023 tax year
In 2023, individual filers won't pay any capital gains tax if their total taxable income is $44,625 or less. The rate jumps to 15 percent on capital gains, if their income is $44,626 to $492,300. Above that income level the rate climbs to 20 percent.
Social security benefits are not taxable by the State of California. Social security benefits may be taxable by the federal government. Railroad sick pay is also not taxable by the State of California. It is taxable by the federal government unless it is a payment for an on the-job-injury.
Do proceeds from stock sales count toward the Social Security earnings limit? No. Income that comes from something other than work, such as pensions, annuities, investment income, interest, IRA and 401(k) distributions, and capital gains is not counted toward the earnings limit and will not affect your benefit.
Are there lifetime limits to how much capital gains taxes I must pay? There is no limit, either on how much you can gain from rising appreciation in assets or the amount of taxes you can owe.
The 2-out-of-five-year rule states that you must have both owned and lived in your home for a minimum of two out of the last five years before the date of sale. However, these two years don't have to be consecutive, and you don't have to live there on the date of the sale.
One-time forgiveness, otherwise known as penalty abatement, is an IRS program that waives any penalties facing taxpayers who have made an error in filing an income tax return or paying on time. This program isn't for you if you're notoriously late on filing taxes or have multiple unresolved penalties.
As long as what you're receiving is a Social Security benefit and not Supplemental Security Income (SSI), then the fact that you sold your house won't have any effect on your benefits.
Any income that you receive from investments that you held for one year or less must be included in your taxable income for that year. For example, if you have $90,000 in taxable income from your salary and $10,000 from short-term investments, then your total taxable income is $100,000.
The ownership requirement: To qualify, only an individual, their relatives, or a partnership must own the business shares for at least 24 months before claiming the LCGE. This requirement stops investors from buying and reselling small business shares only for tax purposes.
Key Takeaways. Capital gains taxes apply only to “capital assets,” which include stocks, bonds, digital assets like cryptocurrencies and NFTs, jewelry, coin collections, and real estate.
While capital gains may be taxed at a different rate, they are still included in your adjusted gross income, or AGI, and thus can affect your tax bracket and your eligibility for some income-based investment opportunities.
How do I avoid the capital gains tax on real estate? If you have owned and occupied your property for at least 2 of the last 5 years, you can avoid paying capital gains taxes on the first $250,000 for single-filers and $500,000 for married people filing jointly.
Capital gains are taxable at both the federal level and the state level. At the federal level, capital gains are taxed at a lower rate than personal income.
Which countries are tax free? There are currently 14 countries with zero income tax in the world: Antigua and Barbuda, St. Kitts and Nevis, United Arab Emirates, Vanuatu, Brunei, Bahrain, the Bahamas, Bermuda, Cayman Islands, Monaco, Kuwait, Qatar, Somalia, and Western Sahara.
We conform to the IRS rules and allow you to exclude, up to a certain amount, the gain you make on the sale of your home. You may take an exclusion if you owned and used the home for at least 2 out of 5 years.
Capital gains are generally included in taxable income, but in most cases, are taxed at a lower rate. A capital gain is realized when a capital asset is sold or exchanged at a price higher than its basis.
Capital gains taxes are progressive, similar to income taxes. Short-term capital gains are taxed according to the relevant federal tax rate. Long-term capital gains are subject to 0%, 15% or 20%, depending on your taxable income. According to the IRS, most people pay no more than 15% on their long-term capital gains.
Introduction: My name is The Hon. Margery Christiansen, I am a bright, adorable, precious, inexpensive, gorgeous, comfortable, happy person who loves writing and wants to share my knowledge and understanding with you.
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